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German Raw Materials Fund implementation at risk due to Ministry disagreement

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Last summer, the German Government announced the establishment of a state-run raw materials fund with a capital of one billion euros. The aim was to support foreign and domestic resource projects. However, the implementation of the fund has faced setbacks. Initially put on hold due to a ruling by the Federal Constitutional Court and subsequently restructured, the project now faces the risk of failure, as reported by the German news outlet Handelsblatt. The main issue is a missing allocation letter from the Federal Ministry of Finance to the state development bank KfW, which is slated to manage the fund. The finance ministry opposes KfW’s direct involvement in projects, despite this being the fund’s intended purpose, the newspaper elaborates.

Earlier this year, the German Economic Institute (IW) published a brief study on German investments in raw materials abroad, questioning the fund’s financial resources. Comparatively, countries like France and Italy have provided twice as much funding for similar instruments. German companies are also notably underrepresented in countries abundant in raw materials, unlike Austria or Sweden.

Improving the investment environment is crucial given the rising dependence on raw material imports, especially to assist companies during initial exploration stages when revenue generation is minimal. This becomes particularly pertinent under the Critical Raw Materials Act, which mandates diversification of raw material supply and production within the European Union. Despite there being no rare earth mines in the EU, the law requires that ten percent of annual consumption must come from domestic production by 2030.

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