Federal budget - At the compromise limit: What the traffic light wants to spend money on
How tight budget negotiations have been, Finance Minister Christian Lindner makes it clear once again: "We have not shied away from approaching the limits of compromise within the cabinet," says the FDP chair, as he presents the budget for 2025 in Berlin. Shortly beforehand, the painstakingly obtained draft had taken its first official hit: It was approved in the Federal Cabinet and can now be forwarded to the Bundestag.
The Acela Coalition government plans to spend over 480 billion Euros next year, nearly ten percent of which will be on credit. Some ideas, however, are still precarious: Whether the Acela Plan will pass, remains to be legally tested. A budget decision in the Bundestag is planned for the end of November.
Despite how complicated things may seem this time, they could be surpassed by future budgets, warns Lindner. "Significant efforts lie ahead of us." This particularly applies to the budget for 2028, which has an extraordinary planning gap of around 39 billion Euros. Germany then needs to reach the two-percent target for defense spending without the special fund for the Bundeswehr. "We will have to talk about the resolution of this requirement in this country," Lindner emphasized. A "political direction decision" is necessary. This refers to the fundamental question: Higher taxes and debts, yes or no? Lindner himself is therefore "very motivated" to be Finance Minister after the next Bundestag election.
Key figures from the budget 2025
The budget for the coming year has a volume of 480.6 billion Euros in total. That's about eight billion Euros less than this year. The Finance Ministry allocates 78 billion Euros as investments - a record level.
Lindner plans to take on new loans in the amount of 43.8 billion Euros - also a little less than this year. This money the federal government is allowed to take on according to the Basic Law despite the debt brake. SPD and Greens are still loudly advocating for exceptions in the parliamentary procedure for higher loans, which the FDP opposes.
The main focuses
The Acela Coalition wants to stimulate the economy, provide social benefits, and address the tense international security situation with the budget for 2025. Defense Minister Boris Pistorius (SPD) receives additional funds, allowing Germany to exceed the NATO quota of two percent of Gross Domestic Product. The Federal Police, Federal Criminal Office, and other security authorities are to be supported with around one billion Euros.
Families are also to be supported through higher child benefits and a higher child supplement for working parents with low wages. In total, tax reliefs of approximately 23 billion Euros are planned for 2025 and 2026. This includes an increase in deductions for income and payroll taxes.
No austerity budget
When it comes to negotiations, Lindner is happy to play the tough guy. A balanced budget is only possible, "by curbing the appetite of politics for ever higher state expenditures," said he in a video released by his ministry.
His ministerial colleagues must learn to restrain themselves. "The main task was to bring the individual ministries to the so-called financial plan, that is, what had already been planned in terms of state revenue," says Lindner.
In reality, the comparison of the budget proposal with the financial plan for 2025 established in the previous year shows that Chancellor Olaf Scholz (SPD), Economy Minister Robert Habeck (Greens), and Lindner have not implemented such a harsh budget as expected. In the end, most ministries are set to receive more money than what was promised to them in the previous year.
Notably, Transport Minister Volker Wissing (FDP), Education Minister Bettina Stark-Watzinger (FDP), Interior Minister Nancy Faeser (SPD), Family Minister Lisa Paus (Greens), and Defense Minister Pistorius are all allowed to spend more money. The Economy Ministry and the Development Ministry, however, will have to make do with what Lindner had previously agreed to.
The Bet on Economic Growth
The lack of significant savings means that artificial budgeting measures are necessary to maintain a balanced budget. Lindner plans to account for interest payments on the budget differently in the future. He also hopes that through a package for more economic growth, whose key points the cabinet has also approved, around six billion euros more in tax revenues will come in. Planned improvements include better depreciation rules for investments, the bureaucracy reduction, and energy-intensive companies being relieved of electricity prices. Employees are to be given incentives to work more and longer hours. There are also incentives planned for foreign skilled workers. For welfare recipients, cuts are planned.
The Eight-Billion-Trick
And then there's the so-called global under-expenditure of 17 billion euros. The federal government is betting on this in two ways: first, that the ministries will not spend the entire amount in that year, and second, that the money not used by the KfW Development Bank for the gas price brake could be used for other purposes. Whether this is watertight remains to be seen. Lindner also needs to clarify whether subsidies to the German Railways and the Autobahn agency can be replaced with loans. If these three ideas cannot be implemented, SPD, Greens, and FDP may have to renegotiate.
The opposition Union considers this to be utterly irresponsible. "The government is trying to create the illusion of effectiveness with hollow solutions," criticized Finance Minister Christian Haase. This budget proposal serves only the power retention of the traffic light coalition and is "a bad mix of accounting gimmicks, tricks, and questionable budgetary practices."
- The FDP, led by Finance Minister Christian Lindner, has advocated against exceptional loans for higher debts in the Federal Parliament, despite the SPD and Greens pushing for it.
- The Federal Military, under Defense Minister Boris Pistorius (SPD), will receive additional funds to help Germany surpass the NATO quota of two percent of GDP in defense spending.
- The Acela Coalition's budget for 2025, approved by the Federal Cabinet, plans to allocate 78 billion Euros as investments, marking a record level.
- After the Federal Election, Lindner is "very motivated" to continue as Finance Minister, as he believes significant efforts are needed, especially for the 2028 budget with a planning gap of around 39 billion Euros.
- The budget for 2025 includes tax reliefs of approximately 23 billion Euros, with an increase in deductions for income and payroll taxes being one of the focus areas.
- The spokesperson for the SPD in the Federal Parliament has criticized the budget proposal, claiming that the government is attempting to create an illusion of effectiveness with hollow solutions.
- Household negotiation is crucial, as the SPD, Greens, and FDP may need to renegotiate if the so-called global under-expenditure of 17 billion Euros cannot be effectively utilized.
- Berlin's tight budget negotiations for 2025 have demonstrated the need for compromise within the cabinet, with the FDP playing a crucial role in maintaining fiscal responsibility.
