After a long debate - Ampel coalition agrees on budget - debt brake remains
The heads of the traffic light coalition have achieved a breakthrough in the 2025 federal budget and the growth package after long negotiations. This was reported by the German Press Agency from coalition circles following consultations between Federal Chancellor Olaf Scholz (SPD), Finance Minister Christian Lindner (FDP), and Economics Minister Robert Habeck (Greens).
They had met in the afternoon on Thursday. The main point of contention: the debt brake. It is expected to be observed next year. Details of the agreement were not yet known. The Bundestag factions of the SPD and Greens were to meet for sessions at 7:00 pm.
Coalition leaders in budget stress
Scholz, Habeck, and Lindner had been in negotiations for weeks. They had originally wanted to reach an agreement by this Wednesday. Now, July 17, is being discussed for the cabinet decision. To reach this deadline, a quick consensus was necessary because the drafting of the budget law usually takes approximately ten days. From mid-September, the Bundestag will deal with the budget draft, which could then be passed in November or December.
Billion-dollar gap needed to be closed
Individual ministries such as the Foreign Office or the Development Ministry initially refused to accept spending cuts proposed by Lindner due to international obligations. The social budget was also a contentious issue. In addition, a gap of around 10 billion euros still needed to be closed. The SPD, in particular, was pushing for the debt brake to be postponed again due to financial burdens from the Ukraine war and to have more room for investments. For Lindner's FDP, this was not an option. The SPD rejected cuts in the social budget.
Government plans growth package
In Germany, only a mini-growth is expected this year. Companies are holding back on investments, and private consumption is not picking up. Business associations have long complained about disadvantages such as high tax and tariff burdens, a lack of skilled labor, and excessive bureaucracy.
Here, the government plans to start with the "growth turbo." Scholz had already stated that the German government wants to encourage private investments. He offered improved tax depreciation incentives for companies. Additionally, the acquisition activity of parents should be facilitated, and employment incentives should be increased, tax-wise.
- Following the breakthrough in the 2025 federal budget and the growth package negotiations, Robert Habeck, as the Economics Minister from the Alliance 90/Greens, will play a crucial role in implementing the planned growth measures for households.
- The success of the traffic light coalition's budget negotiations is a significant achievement for Federal Chancellor Olaf Scholz (SPD) and Finance Minister Christian Lindner (FDP), as they worked to close the billion-dollar gap and agree on a growth package to boost the economy.
- The FDP, led by Christian Lindner, supported the growth package, which includes improved tax depreciation incentives for companies, facilitating parental acquisition activities, and increasing employment incentives, to stimulate private investments and combat economic stagnation in Germany.
- Despite disagreements and pushbacks from coalition partners and individual ministries, such as refusing spending cuts propositions from the FDP due to international obligations, Robert Habeck, Olaf Scholz, and Christian Lindner managed to secure the "growth package" for the German economy, aiming to increase GDP growth and stimulate private investments.
