German government distributes 48 billion euros in subsidies: Where the money ends up now

Status: 15.01.2024, 04:51 a.m.

By: Lars-Eric Nievelstein

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In the new year, the government plans to provide subsidies amounting to 48 billion euros. Which industries benefit the most? This is shown by a study by the University of Europe.

Iserlohn – There is still a lot of pressure on the traffic light coalition because of the cuts in the new budget. On the one hand, the farmers have been showing since the beginning of the week what they think of the discontinuation of their subsidies, on the other hand, the railways have come forward after a cut in the millions. This shows that state subsidies are being eliminated in several places, which makes the affected industries less than happy. But where does the money actually end up?

21.8 billion euros in subsidies for housing construction

In total, the German government intends to distribute more than 48 billion euros in subsidies in the new year. A recent study by the University of Europe for Applied Sciences reveals the details: Funding for construction and renovation gets the largest share with almost 22 billion euros. The results come from the 29th subsidy report of the Federal Government.

This represents a significant leap in subsidies for urban development: in the previous year, it had amounted to 19.5 billion euros. In 2021, it was just under 5.2 billion euros. This is hardly surprising: both economists and representatives of the construction industry have recently expressed pessimism about residential construction. New estimates reveal that significantly fewer apartments will be completed in 2024 than needed.

Farmers are dissatisfied with their subsidies

In the run-up to the election, there had been fierce criticism from the agricultural industry because the federal government had planned to overturn the so-called agricultural diesel and the exemption of agricultural vehicles from vehicle tax. This had involved tax breaks amounting to around 900 million euros. Although the federal government partially withdrew from these plans, this is not enough for the farmers. In the new year, the government plans to provide a subsidy of 1.2 billion euros for agriculture.

The German government is distributing 48 billion euros in subsidies. Where do they go? This has been investigated by the University of Europe of Applied Science. © IMAGO/Janine Schmitz photothek

This would mean a reduction of 2023 million euros compared to 300. Within the agricultural industry, a rethink is needed, says Professor Frank Esken, head of the psychology program at the University of Europe for Applied Sciences. "The reduction of climate-damaging subsidies for, in this case the agricultural sector, is not something that the state does to it," says Esken. It is also necessary to create an awareness in the agricultural sector "that ecological restructuring is an economic necessity in the interest of all, i.e. the population as a whole".

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Agricultural subsidies: Family farms need more subsidies

However, he sees a problem with differentiation within the industry. "Small family businesses have a much harder time than large companies. The former is pushed to the financial edge of existence," explains Esken in a statement. For an ecological reorientation through state requirements, stronger support is needed.

"It won't work without government guidelines, but neither will it be possible without individual responsibility and an awareness that ecological conversion is in everyone's interest," says the environmental psychologist. In his opinion, various interest groups should not exclusively hold the state accountable when it comes to ecological conversion.

Significant increase in subsidies for the industrial economy

With around 19.8 billion euros, the commercial economy is in second place among the largest recipients of subsidies. Here, too, there was a significant jump between 2022 and 2023: as recently as 2021, the commercial economy had received around 7.5 billion euros in subsidies.

5.6 billion euros will be invested in transport. This includes the improvement of mobile and data networks. By comparison, in 2021, subsidies had been around four billion euros. As the University of Europe further discovered, subsidies for "savings promotion and wealth creation" also increased. However, with an increase from 146.7 million euros to around 170 million euros, there were no such extreme changes here as in the other sectors.

Subsidies per sector

At present, the Federal Government is concentrating primarily on the energy-efficient renovation of buildings. At EUR 19.2 billion, the item "Modernisation, heating energy savings and energy-efficient refurbishment, energy efficiency in the building sector" is the largest single item in the subsidy report. Since 2021, an almost fivefold increase has been observed here.

This will be followed by the "promotion of microelectronics", into which about 3.9 billion euros are now to flow. Since the EU launched the "European Chips Act" in 2022, Europe has stepped up efforts to build its own chip industry. By 2030, Europe's market share in global chip production is expected to reach 20 percent.