(Bloomberg) -- Chancellor Olaf Scholz raised the stakes in the campaign for Germany’s snap election by proposing an investment fund worth at least €100 billion ($106 billion) to help pay for the country’s modernization.
In a speech Saturday at a Social Democratic Party event in Berlin, Scholz said the fund, which could later be topped up, should include both public and private money and could be used for investment in areas such as energy infrastructure or home construction.
He also pledged, if he comes from behind in the polls to secure reelection, to introduce a tax rebate for companies of 10% of the value of investments in Europe’s biggest economy, calling it a “Made in Germany bonus.”
“Germany’s future must not be ruined by excessive saving,” Scholz said, reiterating a promise to loosen stringent borrowing rules known as the debt brake. “On the contrary, new growth only comes from more investment.”
He attacked the opposition conservatives under Friedrich Merz, who have a big lead in the polls, accusing the CDU/CSU alliance of lacking ideas on how to pay for what he called “Germany’s renewal.”
“Where is the proposal from the CDU and CSU as to how we invest in our neglected roads, bridges and railways?” Scholz asked. “Anyone who votes for the SPD in February can rely on this: We’re getting our country into shape.”
Germany is heading to the polls on Feb. 23 after the chancellor dismantled his three-party coalition with the Greens and the Free Democrats due to a prolonged dispute over government borrowing — an issue that is now front and center in the election campaign.
Scholz sacked his fiscally hawkish FDP finance minister, Christian Lindner, who was unwilling to sanction a loosening of borrowing rules to help pay for the modernization of the country’s creaking infrastructure and digital and climate transformation.
Merz has said he may be open to reforming Germany’s borrowing rules, even though the debt brake mechanism has long been sacrosanct for his conservative group.
Scholz’s surprise move pitched Germany into political turmoil at a time when its economy is barely growing and major manufacturing companies are laying off thousands of workers and considering factory closures.
Scholz is staying on in a minority government with the Greens until parliament is dissolved ahead of the election. Without a majority in the lower house, he’s unlikely to get any major bills approved before the snap vote.
Although Scholz’s SPD is trailing in the polls, there was good news for the chancellor in a new Insa survey for the Bild newspaper published Saturday, in which he made up significant ground on Merz.
The Social Democrat incumbent, who was officially nominated as his party’s lead candidate on Monday, would get 22% of the vote if Germans could choose their chancellor directly, up seven percentage points from the previous week.
Merz dropped one point to 30%, while Robert Habeck, the lead candidate for the Greens, lost two points to 16%, Bild said.
The survey was even more positive for Scholz in a straight choice for voters between him and Merz. The conservative leader still leads on 35% but Scholz gained six points compared with the end of September and is just behind on 33%.
Although Scholz looks to have gained some ground on Merz in a head-to-head comparison, polls show that backing for the CDU/CSU is still about twice as strong as for the SPD.
The conservatives lead at around 32%, the far-right Alternative for Germany is second with about 18% and the SPD third at 15%, according to a polling average calculated by Bloomberg.
The Greens are fourth with 13% and the BSW — a new far-left party founded in January — fifth at 8%. Lindner’s FDP remain in danger of missing the 5% threshold for getting into parliament.
Lindner has come under pressure in recent days after two senior party figures stepped down from their roles following the publication of an internal document that detailed earlier plans to quit the coalition.
In an interview with public broadcaster ARD on Friday, Lindner said he still intends to lead his party into the election.
“I and my party are now in this extremely difficult situation,” he said. “But I believe that the political decision for which I am responsible remains the right one.”
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Arno Schütze.
(Updates with Scholz comments, background starting in fifth paragraph.)
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