Germany’s finance minister Christian Lindner has called on pension funds to invest more in the country’s real economy, aiming to create a more robust platform for domestic growth. Speaking at the liberal party’s (FDP) conference in Berlin, Lindner emphasized the need for a new Future Financing Act to mobilize private capital.
Key Takeaways
- Christian Lindner advocates for pension funds to invest in Germany’s real economy.
- A new Future Financing Act is proposed to mobilize private capital.
- Germany faces a competitive disadvantage compared to the US due to a lack of capital markets for private investment.
- The FDP demands economic reforms to make Germany more competitive.
The Call for Domestic Investment
Christian Lindner, Germany’s finance minister, has made a compelling case for pension funds to diversify their investments beyond traditional assets like government bonds and real estate. Speaking at the FDP conference in Berlin, Lindner highlighted the need for pension funds to invest in infrastructure and business ventures to stimulate domestic growth.
“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,” Lindner stated.
Future Financing Act: A Pillar for Growth
Lindner believes that Germany needs another Future Financing Act (Zukunftsfinanzierungsgesetz) to mobilize private capital. The previous act, approved last year, lowered the market capitalisation threshold for an IPO to €1 million, encouraging the listing of start-ups and small and medium-sized enterprises (SMEs).
The finance minister 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,” Lindner added.
Economic Reforms and International Comparisons
The FDP is demanding significant economic reforms, arguing that Germany is “currently not competitive [and] the economy is stagnating like in no other industrial country.” This sentiment echoes the plans laid out by the UK’s chancellor of the exchequer, Jeremy Hunt, to unlock up to £75 billion in investment from defined contribution (DC) and Local Government Pension Schemes (LGPS) to support the UK’s economy.
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 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 strategic move aimed at boosting domestic growth and making the country more competitive on the global stage. With the proposed Future Financing Act and a push for economic reforms, Germany aims to create a more vibrant capital market culture, similar to that of the US.
Sources
- German finance minister calls pension funds to invest in domestic growth | News | IPE, Investment & Pensions Europe.