After dispute - Federal Cabinet sets budget 2025 in motion: For this, the money is planned
## Contents
- Key Figures
- Focus Areas of the Federal Budget
- No Austerity Budget
- Gimmicks and Open Questions
The contentious federal budget for 2025, long debated in the Traffic Light Coalition, has taken its first official step. The cabinet approved the draft, which can now be forwarded to the Bundestag.
This marks the beginning of the "entry into the economic transition," Finance Minister Christian Lindner (FDP) explained. The cabinet also passed several economic policy initiatives 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 the effort. Marathon sessions, a sleepless night, and anxiety about the future of the coalition - all seemingly secondary. "It's done," Scholz 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, remain uncertain. The budget debate 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 earmarks 78 billion Euros for investments - a record level.
Finance Minister Lindner intends to take on new loans in the amount of 43.8 billion Euros - slightly less than this year. The German government is allowed to take on this debt according to the Constitution, despite the debt brake. SPD and Greens had considered invoking an exception for higher loans, but the FDP prevailed.
However, more credit is 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 weak. The money is intended to cover additional needs for the promotion of green electricity and the citizen's income, as less tax revenue is coming in.
Focus Areas of the Federal Budget
The Ampel Coalition aims to stimulate the economy, maintain social benefits, and address the tense international security situation with the 2025 budget. Defense Minister Boris Pistorius (SPD) will receive 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 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, including an increase in tax-free allowances for income tax and wage tax.
No Austerity Budget
When it comes to negotiations, Lindner is happy to play the tough guy. A balanced budget is only possible, he said in a video released by his ministry, "by curbing the insatiable appetite of politics for ever higher state expenditures."
His cabinet colleagues must learn to be frugal. "The main task was to bring the individual ministries in line with the so-called financial plan, that is, what had already been 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 a harsh budget. In the end, most ministries are supposed 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 set to receive more money. Even Foreign Minister Annalena Baerbock (Greens), who reportedly caused obstacles in the negotiations, is set to receive over 500 million Euros more than planned.
Others will have to make do with what Lindner had offered them in the previous year: for instance, the Economics Ministry, the Development Ministry, and - with a small minus - the Building Ministry.
Tricks and decisive open questions
The absence of major savings means that artifices are necessary for a balanced budget. Lindner plans 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 not uncommon, 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 questionable from a constitutional perspective. For example, money that the KfW development bank did not use for the gas price brake could 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 negotiate again.
- The Household sector may need to adapt to the implications of the approved household budget for 2025, which could significantly impact their financial planning.
- The Federal government, through the approval of the budget, is demonstrating its commitment to boosting the economy while maintaining social benefits, a role outlined in the Traffic-Coalition's focus areas.
- BMF (Federal Ministry of Finance) Minister Christian Lindner has stressed that the budget is a step towards economic transition, but admitted that several ideas remain uncertain and will be discussed further in the Bundestag.
- TikTok has become a platform for Chancellor Olaf Scholz to express his satisfaction with the budget compromise, highlighting the collaborative efforts of his party, the SPD, and coalition partners.
- The FDP, led by Christian Lindner, has successfully prevented the invocation of an exception for higher loans in the Federal budget, despite pressure from the SPD and Greens.
- Boris Pistorius, the Defense Minister of the Federal government, will receive additional funding to allow Germany to exceed the NATO quota, as highlighted in the 'Focus Areas of the Federal Budget'.
- The implementation of certain tricks and decisive open questions in the budget, such as accounting for interest payments differently and relying on global under-expenditure, will be closely monitored in the upcoming negotiations in the Federal Assembly.
