germany to invest $5.6 billion on digital infrastructure

Germany plans to invest an extra 5 billion euros ($5.6 billion) over the next five years to equip more than 40,000 schools and colleges with faster internet, wireless access points and tablet computers, the Education Minister said on Wednesday. The investment plan, which still needs to be agreed by Chancellor Angela Merkel’s cabinet, is another sign that Germany is more willing to meet international calls to spend its record budget surplus on infrastructure and education.

“We have to make a big leap forward to improve digital education”, Johanna Wanka said, adding that the government would make the money available for the 16 federal states that are traditionally in charge of education in Germany. German schoolchildren have only scored mediocre results in international education studies in the past years, although some evaluations show that they are slowly catching up.

A survey on digital education in Germany has found that less than 2 percent of pupils have daily access to a school computer. The International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) have for years urged Germany to step up public and private investment to boost domestic demand and reduce its massive current account surplus.

Close allies such as France and the United States have also called for Germans to open their wallets, and the government has reacted by increasing its spending on infrastructure and accommodating and integrating a record influx of refugees.

Critics say Germany could do much more like taking advantage of record-low borrowing costs to take on new debt and ditching the balanced budget policy championed by Finance Minister Wolfgang Schaeuble.

In another potential boost for domestic demand, the cabinet agreed on Wednesday on Schaeuble’s proposal to cut income taxes by 6.3 billion euros in 2017 and 2018. The plan, which was already announced by Schaeuble and Merkel last week, aims to correct “cold progression” or bracket creep in the tax system.

Thresholds in Germany’s progressive tax system are not automatically adjusted for inflation. This means that workers who get a pay rise can find themselves ending up with a net pay cut.