Federal Government - Budget 2025: What the traffic light coalition is negotiating
The week of truth in the household negotiations of the traffic light government could begin: If the Bundestag is to receive the budget proposal in time, the coalition leaders must come to an agreement in the coming days. Although many problems are said to have already been resolved in government circles, the billion-dollar hole is still not plugged. Convictions clash more clearly than ever before - and some are still worried about the future of the coalition.
The Billion-Dollar Hole
The German government plans to spend around 450 billion Euros next year. Finance Minister Christian Lindner (FDP) had already identified a gap in the order of 15 to 30 billion Euros in his plans before the negotiations. He therefore set tight budget guidelines for his ministerial colleagues - but not all of them adhered to them. Above all, Foreign Minister Annalena Baerbock (Greens), Defense Minister Boris Pistorius, Labor Minister Hubertus Heil, Development Minister Svenja Schulze, and Interior Minister Nancy Faeser (all SPD) demanded significantly more money.
Therefore, the budget is now the main issue: In dozens of tripartite talks, Federal Chancellor Olaf Scholz (SPD), Vice Chancellor Robert Habeck (Greens), and Lindner are said to have narrowed their differences. They meet almost daily, including on weekends. "The negotiators still want to talk further in the coming days," said Government Spokesperson Steffen Hebestreit. "The week is still long."
Usual leeway exhausted
The negotiators have gone through the budget line by line. It was about small savings and shifts, a few million here, billions there. Some ministers made concessions - in the interest of the cause.
The usual leeway in a federal budget may have been exhausted by now - for example, a recalculation of expected interest payments following the interest rate cut by the European Central Bank. A supplementary budget for the current fiscal year could also provide some relief. Since the economy is in a poor condition, the federal government is allowed to borrow several billion Euros more than previously planned. If this is used, other reserves could be spared - and available for the next year.
However, it is also heard that this will not be enough.
The debt brake and the FDP as an outsider
Above all, the Social Democrats keep throwing the idea of taking on additional debt into the room, opening the door for the Greens and closing it in the face of the FDP. But Lindner and his party are increasingly isolated in this question. Many economists and business representatives also call for more debt than planned.
In the room are new special funds that could run outside the debt brake - for example, to invest billions in infrastructure. Others want the Bundestag to declare a state of emergency in connection with the high expenditures related to the Ukraine crisis. According to the Basic Law, the debt brake could then be suspended.
The FDP draws a red line at this. In response to SPD leader Saskia Esken's statement, "For me, it's secondary whether the debt brake is maintained or whether it is suspended again due to the Notstand because of the Ukraine crisis", Lindner wrote succinctly on X: "A constitutional state... even if you don't love the articles of the Basic Law that you don't like."
The FDP warned that if the Bund now takes on more debt, interest rates would later be burdensome. This is not fair for future generations. Frustration has built up among younger Liberals, as Lindner recently approved a pension package whose main burden the young generation will have to bear. Perhaps that's why party leader Lindner is advocating so vehemently for a tax adjustment for inflation. He may also be using it to secure the coalition's continuation.
Chancellor Scholz under pressure from his party
Chancellor Scholz has shown himself to be publicly at least in line with Lindner regarding adherence to the debt brake. "We have to make do with the money we have. There's no way around that," he said in a summer interview on the ARD program "Report from Berlin." He also critically looks at potential misuse of citizens' money in the Citizens' Income - and provoked the left wing of his party.
And he is now putting visible pressure on Scholz for the first time since his chancellor candidacy. All three streams of the faction, which seldom speak with one voice, are united in their opposition to the "dogma of the black zero" and demand an exception to the debt rule. A left-wing party faction even wanted to start a membership initiative against the FDP-demanded cuts in the social sector. They wanted to prescribe conditions to SPD deputies for when they could give their approval in the Bundestag.
The party leadership stopped this on Monday, as they consider it inadmissible. "The budget legislative process lies with the German Bundestag and the freely elected deputies and cannot therefore be negotiated in a membership initiative," it said after a SPD presidium meeting. But the message to the FDP - and also to their own chancellor - is clear: We won't let everything be decided upon us.
The final word on the budget
The negotiators want to bring the budget to the cabinet on July 17. After the cabinet decision, the draft is then forwarded to the Bundestag. The budget experts in the factions need almost the entire summer to work through the several thousand pages. After that, the parliamentary procedure begins - and thus a new, month-long struggle for millions for this project and billions for that project. The final word on the budget lies with the parliament. The final decision usually falls in a budget week in December.
- Despite these challenges, Chancellor Olaf Scholz and Vice Chancellor Robert Habeck (both SPD) are actively involved in the budget negotiation process, frequently meeting with Finance Minister Christian Lindner (FDP) over the weekend.
- The Ukraine crisis has also added a new layer of complexity to the budget negotiations, with some arguing for declaring a state of emergency and suspending the debt brake to ensure sufficient funding.
- Foreign Minister Annalena Baerbock and Defense Minister Boris Pistorius, both from the SPD, are among the ministers pushing for increased spending, creating tension with the FDP's advocacy for adhering to the debt brake.
- If the budget negotiations fail, the future of the traffic light coalition, a three-party alliance between the SPD, Greens, and FDP, could be at risk.
- Nancy Faeser, the Interior Minister from the SPD, is another key player in the budget negotiation process, with her views on household matters influencing the coalition's decisions.
- Svenja Schulze, the Development Minister from the SPD, has also expressed her views on the budget, emphasizing the need for adequate funding for certain projects.
- Hubertus Heil, the Labor Minister from the SPD, is another minister who has argued for increased spending, highlighting the potential impact of the budget on German households and workers.
- The finance committee of the Bundestag, Germany's federal parliament, will play a crucial role in the final approval of the budget, giving parliamentarians the opportunity to scrutinize and amend the proposal.
- The FDP, led by Lindner, has been consistently advocating for fiscal discipline, underscoring the importance of adhering to the debt brake and ensuring a sustainable financial future for Germany.
- The future of German policy-making could hinge on the successful resolution of these budget negotiations, with the outcome likely to shape the trajectory of the German economy and the country's international standing for years to come.
