Today the German government adopted the German Recovery and Resilience Plan (DARP). Ninety percent of the spending in Germany’s recovery plan is targeted towards climate action and the digital transformation. This means that the German government is going well beyond the ambitious targets set by the EU. According to analysis by the German Institute for Economic Research (DIW), the planned measures will have a very positive impact on economic output and jobs.
“Today is a good day for Europe. Germany and France are presenting their coronavirus recovery plans. The EU recovery fund makes it possible for all other EU countries to also adopt measures in order to emerge stronger from the crisis. We can now take united action towards a strong EU that is based on solidarity and is fit for the future. The German recovery plan sends a clear signal in favour of climate action, digitalisation, growth and jobs.” Finance Minister Olaf Scholz
The EU and its member states responded to the crisis quickly and vigorously with far-reaching measures. Germany and France took the initiative at the decisive moment and are key architects of the European recovery programme Next Generation EU.
The Recovery and Resilience Facility (RRF), which has a volume of €672.5 billion, is the central instrument of Next Generation EU. The RRF has the objective of leading the European economy out of the recession caused by the coronavirus pandemic while at the same time providing key impetus for important forward-looking investments and reform measures. To this end, EU member states are submitting national recovery and resilience plans and are committing themselves to implementing ambitious investments and reforms. Specific, verifiable milestones and objectives must be defined for every investment and reform project.
German Recovery and Resilience Plan: boosting climate action and the digital transformation
The German Recovery and Resilience Plan (DARP) sends a clear signal in favour of a climate-friendly and digital future. A total of 90% of the planned spending in the DARP is targeted towards climate action and the digital transformation. This means that the German government is going well beyond the EU’s ambitious targets, which require 37% of spending to be directed at climate action and 20% at digital issues. The DARP is setting a new long-term course for greater investment in forward-looking technologies and also in protecting the health of the population.
Germany is expecting to receive grants totalling approximately €25.6 billion (net amount excluding VAT) from the Recovery and Resilience Facility. The DARP shows the gross spending as contained in the federal budget, which totals just under €28 billion.
Significant boost to growth: GDP expected to rise by 2%
According to the German Institute for Economic Research’s analysis of the economic impact, the DARP’s measures are expected to boost gross domestic product by around 2%, and employment by about ½%, in the long term.
€11.5 billion for climate policy and the energy transition
The DARP’s first priority, which has around 40% of the total financial volume, is climate policy and the energy transition. The measures in the area of climate action and the energy transition include massive investments in the development of a well-functioning hydrogen economy and measures to promote climate-friendly mobility and energy-efficient building renovation.
Climate policy and the energy transition | selected measures
- Germany will use the DARP resources to expand hydrogen research and to facilitate the transition to the hydrogen economy for companies. Carbon contracts for differences are a market-based instrument which compensates for the higher operating costs of innovative climate technologies during the transition phase. In addition, we will promote research and development into key issues relating to the supply of green hydrogen. The DARP is supporting decarbonisation projects with a total of €3.3 billion.
- The German government will promote purchases of electric cars, buses and rail vehicles by means of additional purchasing incentives and will decisively advance the expansion of charging infrastructure. Within the framework of the DARP, we want to support more than half a million electric cars, 400,000 charging points on residential buildings, 50,000 publicly accessible charging points and 2,800 buses with alternative drive systems, including refuelling and charging infrastructure, among other measures. (approx. €5.5 billion)
- As part of the comprehensive federal programme for energy-efficient building renovation, the DARP will promote the renovation of residential buildings to an energy efficiency level that is significantly higher than the minimum legal standards. Within the scope of the DARP, at least 40,000 residential units will be refurbished to increase their energy efficiency. (approx. €2.5 billion)
Over €14 billion for the digital transformation
A second focus of the DARP is on the digitalisation of the economy and infrastructure and digitalisation in the education system. The issue of digitalisation pervades all areas of the DARP. In total, over 50% of DARP spending contributes to the digital transformation, exceeding the European minimum expenditure level of 20% by a large margin.
Digital transformation | selected measures
- The German government’s Data Strategy comprehensively defines the scope of data policy. This creates new opportunities for the innovative use of data in Germany and the EU. The DARP will support the building up of expertise in this area, laying the foundations for the implementation of the Data Strategy. (approx. €0.5 billion)
- A fast-track programme will drive digitalisation in the rail sector. Existing signal box and level crossing technology will be replaced with safety systems of the latest digital generation. (€0.5 billion)
- The investment programme for vehicle manufacturers/supplier industry will promote investments and research and development into new production facilities and Industry 4.0. It will create additional incentives for the vehicle industry to digitalise its production systems and value chains. (approx. €1.9 billion)
- Digitalisation is a cross-cutting issue in almost all of the areas of the DARP. This includes, for example, the digital education initiative, the cloud and data processing IPCEI, the digitalisation of public administrative services (Online Access Act (Onlinezugangsgesetz), register modernisation) and the digitalisation of the public health system (Hospital Future Act (Krankenhauszukunftsgesetz)).
An international European plan – key joint projects with France
A central feature of the DARP is the Important Projects of Common European Interest (IPCEI) that were jointly initiated by Germany and France in the areas of hydrogen, microelectronics and communication technologies, and cloud and data processing. These projects are open to all EU member states. As a unique feature of the DARP, the IPCEIs will make an important contribution to international cooperation on technology in key fields, thereby creating genuine European added value.
IPCEIs | selected measures
- The aim of the cloud and data processing IPCEI is to create the basis for a sovereign, highly scalable edge cloud infrastructure in Europe. The infrastructure will build on highly innovative, real-time-capable structures distributed across Europe. (€0.75 billion)
- The IPCEI on microelectronics and communication technologies aims to enhance the EU’s capabilities in the area of digital design and intellectual property (IP) with regard to processors, chips for artificial intelligence and connectivity. It will drive the development of capabilities in advanced manufacturing and assembly (up to first industrial deployment) as well as pilot lines to test the next generation of processor chips. (€1.5 billion)
- With the hydrogen IPCEI, Germany and France will promote the creation of production and transport capacities for green hydrogen and the development of a European value chain. (€1.5 billion)
Digital education initiative and measures to improve hospitals
In addition to these major priorities, Germany will also use the funds provided by the Recovery and Resilience Facility, in agreement with the European Commission and in a targeted way, for a digital education initiative, to increase social inclusion, and to strengthen a pandemic-resistant health system.
Education, social inclusion, support for particularly vulnerable groups in the context of the pandemic | selected measures
- The digital education initiative will help to improve device infrastructure by means of a measure that will provide teachers with digital devices on loan. Centres of excellence for digital and digitally supported teaching will support the development of skills. The DARP will also promote the development of a national education platform which will serve as a digital teaching space. (approx. €1.3 billion)
- The programme to future-proof hospitals – which, with a volume of €3 billion, is the largest single measure in the DARP – has the objective of supporting necessary investments in modern emergency capacity and better digital infrastructure for hospitals. (€3 billion)
- A post-pandemic catch-up programme for children and young people for 2021 and 2022 will provide targeted support for pupils who are behind in their learning as a result of the pandemic.
Coherent package of investments and reforms: reducing barriers to investment
The investment priorities will be accompanied by structural reforms to expand public investment capacity and to modernise the public administration in Germany. This reform focus was expressly welcomed by the European Commission. In Germany, the state is effective and capable of taking action during the crisis. Nevertheless, experience has shown that public and private investments are sometimes delayed due to time-consuming administrative and approval procedures. The DARP aims to ensure that administrative processes and approval services are performed faster and in a more citizen-friendly manner, and to ensure that public investment projects are implemented more quickly.
Reforms | selected measures
- The Online Access Act will create a nationwide system of digital administrative services in Germany. This large-scale reform is intended to make using administrative services faster, more efficient and user-friendlier for citizens and businesses. (€3 billion)
- By modernising registers, the German government will implement an important reform in the area of public administrative services. Register modernisation, including the “once-only” principle, will contribute to efficient administrative action and will reduce the burden on citizens and businesses. (approx. €0.25 billion)
- A Federation-Länder group under the leadership of the Federal Chancellery will specifically address, together with the Länder, the issue of reducing barriers to investment. The aim is to identify potential improvements for the public administration and to implement these improvements with a view to achieving a public administration that is efficient and citizen- and business-friendly.
- The German government will significantly increase funding for the consulting agency PD – Berater der öffentlichen Hand GmbH. In this way, we will support local authorities in particular in effectively and efficiently implementing investment funding provided by the Federation. One focus here is on investments in educational infrastructure. (€50 million)