1.1 billion Euros accrued as additional debt within a span of two years - Over a period of two years, the government has incurred an additional debt of EUR 1.1 billion.
Thuringia, the central German state, has announced a new debt strategy involving a total of 1.1 billion euros in loans over the next two years. The strategy aims to stimulate economic growth and improve infrastructure, with funds earmarked for major construction projects and municipal investment programs.
This move comes after a constitutional amendment in March 2025, which allows regional governments to take on additional debt up to 0.35% of their GDP for structural borrowing purposes, exempting certain infrastructure-related spending from the debt brake rules.
The loans will be issued by the Thuringian Reconstruction Bank (Thüringen Aufbaubank, TAB) and will be used to finance necessary improvements and expansions in public infrastructure. This aligns with broader federal initiatives, including a special infrastructure fund of up to 500 billion euros over 12 years, aimed at bridging significant investment gaps in public sector assets.
Finance State Secretary Birger Scholz emphasised that Thuringia does not have a debt problem, and that the loans will be used to support sustainable economic growth. By increasing government investment, particularly in infrastructure and defence, Thuringia aims to stimulate both short-term and long-term growth.
The Bundesbank sees such government investment as a critical factor that will likely lead to stronger GDP growth in Germany from 2026 onward, with expected GDP growth rates rising to 0.7% in 2026 and 1.2% in 2027.
The municipalities, which have the autonomy to decide where to invest the loan funds, will be responsible for ensuring that the funds are used for their intended purposes. The interest and repayment costs for the municipalities' loans will be covered by the state.
Thuringia will pay off the billion-program over 20 years, with an annual cost of 71 million euros. The state is expected to cover the costs of the program through legislation.
Alternative financing models are being discussed in other areas, such as the Thuringian Development Corporation taking over public construction projects for the state. Thuringia aims to achieve balanced budgets without new debt by 2029.
Finance Minister Katja Wolf likened the loan for the municipalities to a grant, stating that more investments are necessary to exit the stagnation phase. This new debt strategy is a significant step towards boosting economic growth and improving infrastructure in Thuringia.
The new debt strategy in Thuringia, which involves employing the Thuringian Reconstruction Bank to issue loans totaling 1.1 billion euros, is an integral part of the state's employment policy, aimed at financing necessary improvements and expansions in public infrastructure. This strategy aligns with the federal government's infrastructure fund, demonstrating a concerted effort to bridge investment gaps in the public sector and stimulate economic growth, as highlighted by Finance State Secretary Birger Scholz. The municipalities, who will manage the loan funds, are expected to use them for their intended purposes, with the state covering the interest and repayment costs, thereby engaging in a form of community policy that prioritizes infrastructure development.
