After a dispute - Federal Cabinet sets Budget 2025 in motion: For this, the money is earmarked
## Contents
- Key Figures
- Focus Areas of the Federal Budget
- No Austerity Budget
- Gimmicks and Open Questions
The long-contested Federal Budget for 2025 of the Traffic Light Coalition has taken its first official step. The Federal Cabinet approved the draft, which can now be forwarded to the Bundestag.
This marks the beginning of the "entry into the economic turnaround," Finance Minister Christian Lindner (FDP) explained. The Cabinet also passed several economic policy incentives intended to boost the recently weak growth.
Chancellor Olaf Scholz (SPD) emphasized in a TikTok video after the grueling budget compromise that the result was worth it. Marathon sessions, a sleepless night, and anxiety about the future of the coalition - all seemingly secondary. "It's done," the Chancellor emphasized.
The Ampel Government plans to spend over 480 billion Euros next year, more than 48 billion of which will be on credit. Some ideas, however, are still precarious. The budget vote in the Bundestag is scheduled for the end of November.
Key Figures
The budget has a total volume of 480.6 billion Euros. This is about eight billion Euros less than this year. The Finance Ministry allocates 78 billion Euros for investments - a record level.
Finance Minister Lindner plans to take on new loans of 43.8 billion Euros - slightly less than this year. The German government can take on this debt according to the Constitution, despite the debt brake. SPD and Greens had considered making an exception for higher loans, but the FDP prevailed.
More loans are to be taken on in the current year: The Cabinet also passed a supplementary budget with an additional 11.3 billion Euros in debt. This is also possible with the debt brake because the economy is so weak. The money is intended to cover additional needs for the promotion of renewable energy and the citizen's income, as less tax revenue is coming in.
Focus Areas of the Federal Budget
The Traffic Light Coalition aims to stimulate the economy, maintain social benefits, and respond to the tense international security situation with the budget for 2025. Defense Minister Boris Pistorius (SPD) receives additional funding, allowing Germany to exceed the NATO quota of two percent of Gross Domestic Product. The Federal Police, Federal Criminal Office, and other security agencies will receive around one billion Euros in funding.
Families will be supported through higher child benefits and a higher child supplement for working parents with low wages. In total, tax relief of approximately 23 billion Euros is planned for 2025 and 2026, also through an increase in deductions for income and payroll taxes.
No Austerity Budget
When it comes to negotiations, Lindner is happy to present himself as tough. A balanced budget is only possible, he said in a video released by his ministry, "by curbing the ever-growing appetite of politics for higher state expenditures."
His ministerial colleagues must learn to restrain themselves. "The main task was to bring the individual ministries to the so-called financial plan, i.e., what was already planned in terms of state revenue," Lindner said.
In reality, the comparison of the budget proposal with the financial plan for 2025 set up in the previous year is significant. It shows: Scholz, Economics Minister Robert Habeck (Greens) and Lindner have not drafted such a strict budget. In the end, most ministries will 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 set to receive more money. Even Foreign Minister Annalena Baerbock (Greens), who reportedly put up a strong resistance in the negotiations, will receive over 500 million Euros more than planned.
Others will have to make do with what Lindner had proposed in the previous year: for example, the Economics Ministry, the Development Ministry, and - with a small minus - the Construction Ministry.
Tricks and decisive open questions
The lack of major savings means that artifices are necessary for a balanced budget. Lindner intends to account for interest payments budget-technically differently in the future. He also hopes that through a package for more economic growth, whose key points the cabinet also approved, around six billion Euros more in tax revenues will come in.
Moreover, there is the so-called global under-expenditure of 17 billion Euros. The federal government is betting on this one hand that the ministries will not spend the entire amount in that year. This approach is common, but the amount is very high.
In the 17 billion Euros, there are also eight billion Euros for whose financing the federal government already has an idea, but which may be constitutionally questionable. For instance, money that the KfW Development Bank did not use for the gas price cap could potentially flow back to the federal budget. Whether this would be watertight remains to be seen.
Lindner also needs to clarify whether it makes economic sense to replace subsidies for the German Railways and the Autobahn agency with loans. These would not be counted towards the debt brake - they could potentially have an impact if the companies borrow money on the capital market. If these three ideas cannot be implemented, SPD, Greens, and FDP may have to renegotiate again.
- During the budget approval process, Finance Minister Christian Lindner from the FDP emphasized that the Traffic Light Coalition's Federal Budget for 2025 marks the beginning of an economic turnaround.
- The Federal Parliament is scheduled to vote on the Federal Budget at the end of November, which has a total volume of over 480 billion Euros, with Olaf Scholz's SPD, Greens, and FDP coalition planning to spend more than 48 billion Euros on credit.
- Households will benefit from the Federal Budget as families will receive higher child benefits and a higher child supplement for working parents with low wages, while the Federal Cabinet also passed a supplementary budget with an additional 11.3 billion Euros in debt to cover additional needs for the promotion of renewable energy and the citizen's income.
- Although the budget proposal shows that most ministries will receive more money than what was promised in the previous year, Finance Minister Christian Lindner still needs to address decisive open questions and artifices to ensure a balanced budget, such as accounting for interest payments budget-technically differently and relying on the global under-expenditure of 17 billion Euros.
