Germany launches 30 billion Euro fund to mobilize private investment

Germany launched the 30 billion?euro initiative "Deutschlandfonds", aiming to boost competitiveness in Europe's biggest economy by mobilizing private capital.

The state-owned KfW will implement the fund coordinated by the Finance and Economy Ministries. It will use guarantees, loans, and equity stakes in order to reduce risk for private investments.

KfW says that new guarantees approved by the parliament for next fiscal year account for 95%.

The German government describes the fund as a "temporary seed funding" to help Germany transform its economy after many years of stagnation. The fund aims to bring in an additional?130 billion euro of private investment.

The initiative targets three sectors: energy utilities, deep tech startups, biotech and defence tech.

Fit for the Future

Katherina Reiche, Economy Minister said: "It is important to direct private funds to areas where innovation occurs. We can then make our supply chain more resilient and fit Germany for the future."

The specific measures include up 8 billion euro in guarantees for industrial transformation projects, 600 million euro of geothermal drilling guarantee, and expanded venture capital financing.

KfW is also planning to finance defence exports as well as purchase securitisations in order to increase lending to small and medium-sized businesses.

The German Startup Association welcomed government plans and pointed out large funding gaps for startups in the country.

The association reported that in the United States in 2024, startups will receive an average investment of 510 euros, as opposed to only 108 in France and 90 in Germany.

The new fund will provide one billion euro for startups by 2030.

(source: Reuters)