Germany’s finance minister, Christian Lindner, has called on pension funds to invest more in the country's real economy. Speaking at the liberal party’s (FDP) conference in Berlin, Lindner emphasized the need for a supportive environment that allows insurance companies and Pensionskassen to diversify their investments beyond traditional assets like government bonds and real estate.
Key Takeaways
- Christian Lindner advocates for increased investment in Germany's real economy by pension funds.
- The Future Financing Act aims to mobilize private capital and support start-ups and SMEs.
- Germany faces a competitive disadvantage compared to the US due to a lack of capital markets for private investment.
- The FDP calls for an economic shift to make Germany more competitive.
Creating a Supportive Investment Environment
Lindner highlighted the importance of creating a platform that enables pension funds to invest in infrastructure and business ventures. “What we have to create is an environment that allows insurance companies and Pensionskassen in Germany to no longer just invest in government bonds, or just in stones, for example real estate, [so] that they can also invest in infrastructure and business ventures,” he said.
The Future Financing Act
The finance minister believes that Germany needs another Future Financing Act (Zukunftsfinanzierungsgesetz) to mobilize private capital. The previous act, a cornerstone of the government’s start-up strategy, lowered the market capitalisation threshold for an IPO to €1 million, encouraging the listing of start-ups and small and medium-sized enterprises (SMEs).
Competitive Disadvantage
Lindner pointed out that Germany has a “competitive disadvantage” compared to the US due to a lack of capital markets for private investment. “In the US, there is a capital market culture. Across society, people invest in companies. [There] the retirement system is based on the strength of your own economy. We also have to go in this direction,” he added.
FDP's Economic Shift
The FDP is demanding a significant economic shift, as Germany is “currently not competitive [and] the economy is stagnating like in no other industrial country,” according to decisions made by party members at the conference. This call for change aligns with similar initiatives in other countries, such as the UK’s plan to unlock £75 billion in investment from defined contribution and Local Government Pension Schemes to support the economy.
European Context
Former Italian prime minister Enrico Letta has also suggested creating a Savings and Investments Union in Europe to unlock €33 trillion of private savings to fund the bloc’s strategic goals. This proposal comes in light of private savings amounting to €300 billion landing in the US and in the hands of US asset managers every year.
Conclusion
Christian Lindner’s call for pension funds to invest in Germany’s real economy is a significant step towards addressing the country’s competitive disadvantages. By creating a supportive investment environment and enacting legislation like the Future Financing Act, Germany aims to mobilize private capital and stimulate economic growth.
Sources
- German finance minister calls pension funds to invest in domestic growth | News | IPE, Investment & Pensions Europe.