- Federal government finds solution in budget dispute
The top of the traffic light coalition has once again found a compromise on the federal budget for the coming year. A government spokesperson announced this. "The guidelines of the debt brake in the Basic Law will continue to be observed, there will be no circumvention." The agreement involves shifts in funds for the state-owned German Railways.
According to the federal government, this will reduce the so-called global underspending by 4.5 billion euros to then 12 billion euros. This is effectively a gap in the budget. The government assumes that this will decrease further due to economic development. However, the federal parliament now faces a relatively large task in the budget negotiations, as the global overspending is significantly larger than usual.
New negotiations on the federal budget
In early July, Federal Chancellor Olaf Scholz (SPD), Vice Chancellor Robert Habeck (Greens), and Finance Minister Christian Lindner (FDP) had already announced an agreement on the budget for 2025. They had previously struggled for weeks to plug a gap of at least 30 billion euros without harsh austerity measures.
The federal government had planned a so-called underspending of 17 billion euros in its July draft. However, the government assumes that the ministries will not spend the entire amount in that year - for example, because projects are delayed. This approach is common, but the amount is very high.
Therefore, this gap should be closed, actually by around eight billion euros. There were reviews on whether the railway and the motorway company should receive credit-financed loans instead of direct subsidies from the budget. In addition, funds at the state-owned development bank KfW were also discussed.
Federal government orders study
Lindner had already expressed legal and economic concerns after the agreement that not all measures considered for a solution might be feasible.
After two studies partly confirmed these doubts, the coalition partners rejected the idea of using 4.9 billion euros of KfW funds for purposes other than the gas price brake in the budget.
It was also disputed whether the railway and the motorway company could be supported without this being counted towards the debt brake. Lindner and Scholz had different opinions on this - hence the renewed negotiations.
More equity for the railway
According to the government, it is planned that the infrastructure division of Deutsche Bahn AG will receive additional equity of 4.5 billion euros - this is supposed to replace the subsidies provided in the current draft of the federal budget for 2025. In addition, the railway is to receive a loan from the federal government of three billion euros. The debt brake remains unaffected.
So far, an increase in equity of around 5.9 billion euros has been planned for 2025, with which the railway is to carry out investments for the renovation of the dilapidated rail network.
The renewed negotiations on the federal budget were triggered by disputes within the coalition, specifically between Federal Chancellor Olaf Scholz and Finance Minister Christian Lindner, over the allocation of funds and adherence to the debt brake. This dispute escalated into a budgetary dispute, affecting the proposed budget for 2025.
Despite the compromise reached earlier, the budgetary dispute continues as questions arise about the feasibility of certain measures to close the budget gap. The coalition partners have reconsidered the use of KfW funds and the impact on the debt brake of supporting the railway and motorway company, leading to differing opinions between Scholz and Lindner.
