No reason to be afraid of the capital markets
The German Nuclear Waste Management Fund (Kenfo), which finances the interim and final storage of radioactive waste, shows that it is possible: with a clever investment policy, a sustainable return can be achieved on the capital markets in the long term, even on behalf of the state.
In 2024, Kenfo performed significantly better than its initial targets. The prospects for 2025 are – despite volatile markets – very promising. Since its launch in 2017, the fund has fulfilled all its obligations, and distributed almost 4.5 billion euros to the federal government. It has also delivered a solid return over the entire term. The average is still burdened by negative interest rates from the initial phase, before the 24 billion euros from the former nuclear power operators could be fully invested.
Country of savers not shareholders
Germany is a country of savers, not shareholders. For many Members of Parliament and government representatives, capital markets investments still belong in the realm of speculation and risk-taking. Many put on the brakes in cases where government related tasks could be carried out via the capital markets, even though they offer great opportunities for the state to handle money more efficiently, and benefit from the effects of compound interest. Germany lacks the necessary culture, especially in politics.
Yet the capital markets turnaround is sorely needed. For the statutory pension, the pay-as-you-go system alone is no longer sufficient, due to demographic trends. Guaranteeing the pension level is not enough. This must also be financed. It is long overdue to introduce funded components. Other statutory security systems for healthcare, nursing care, or the labour market, are also equipped with pots of money that should be managed with expertise.
The already announced state reform needs a new look at the role that capital markets can play. Kenfo proves that even volatile markets can be managed. There is no reason for political capital markets aversion in this country. First of all, a Kenfo representative should be on the CDU/CSU/SPD coalition government pension reform commission. If only for reasons of enlightenment.
