Germany’s big bill: How will Germany’s recent infrastructure bill stimulate economic growth?

Germany has embarked on a historic transformation of its fiscal and economic landscape with the passage of its latest infrastructure bill in March 2025. This legislation, resulting from a rare constitutional amendment, is poised to have profound and far-reaching effects on the German economy, public services and the broader European region over the next decade.

The new law creates a €500 billion infrastructure fund, to be deployed over twelve years, aimed at modernizing Germany’s aging infrastructure and stimulating economic growth. This fund operates outside the traditional constraints of Germany’s “debt brake,” a constitutional rule that previously limited new government borrowing to 0.35% of GDP. The reform also allows for increased borrowing by the federal states and exempts defence spending above 1% of GDP from debt restrictions, thereby freeing up additional fiscal resources for investment.

Last week, the government coalition agreed to borrow almost €500 billion to raise the defence budget to the new NATO target of 3.5% of GDP by 2029, and to borrow almost €300 billion for infrastructure over the same period.

This fiscal expansion should boost domestic demand for many years and more than compensate for weaker external demand. Fixed investment in machinery and equipment, as well as in construction, are likely to benefit from this fiscal impulse.

The infrastructure bill is expected to have positive spillover effects across the European Union. Improved transport links, increased demand for goods and services and a more competitive German economy could strengthen the EU’s overall economic resilience. Furthermore, the focus on energy transition and digitalization aligns with broader European climate and innovation goals.

Konecranes PLC (KCRA HE), one of our holdings in our international strategy, is well positioned to benefit from this massive infrastructure spend.

Konecranes is a global leader in material handling solutions, serving a broad range of customers across several industries. Its product portfolio lifts, handles and moves goods in a safer, more productive and sustainable way. The company reports under three business segments:

• Industrial services: It provides maintenance services and spare parts for any kind of cranes and hoists. With presence in more than 23 countries, Konecranes has one of the most extensive maintenance coverages globally. This segment represents 36% of revenue but more than 56% of income.
• Industrial equipment: It provides industrial cranes and hoists for a wide range of customers, including general manufacturing, logistics, distributors, construction and engineering, metals and transportation equipment. This segment represents 29% of revenue and 20% of income.
• Port solutions: It provides heavy cranes, mobile equipment, software and services for the container handling industry. Konecranes remains the only western player with a broad end-to-end offering for port terminals. Most of the world’s automated container terminals run on Konecranes product. This segment represents 35% of revenue and 24% of income.

Konecranes is exposed to structural growth through increasing automation and digitalization in industry, where its smart lifting and IoT solutions are in high demand. The global rise in e-commerce and logistics boosts demand for its port and warehouse equipment. Sustainability trends drive customers to modernize with Konecranes’ energy-efficient and low-emission solutions. Additionally, infrastructure investment and industrial growth in emerging markets continue to expand its long-term customer base. We believe it is well-positioned to benefit from higher defence and infrastructure spending globally.