- Fresh financial accord, yet falling short of the goal.
The federal government's proposed budget has posed numerous challenges: Numerous discussions involving the Chancellor, discontented coalition partners, and the necessity to revise the budget due to potential constitutional infringements. Despite a compromise, there's still a substantial financial deficit in the budget for the upcoming year. Chancellor Olaf Scholz (SPD), Vice-Chancellor Robert Habeck (Greens), and Finance Minister Christian Lindner (FDP) failed to decrease the deficit to the standard and acceptable nine billion.
Breakthrough close to the weekend
Government spokesman Steffen Hebestreit announced a "consensus on the 2025 budget" in the afternoon. The budget will maintain the debt control provisions of the Basic Law, a major concern for Lindner. The new agreement involves reallocating funds for state-owned Deutsche Bahn.
Chancellor Olaf Scholz (SPD) informed the German Press Agency that the federal government will submit the draft federal budget for 2025 to the Bundestag and Bundesrat today, as agreed in July. "We have decided to increase investments in transport infrastructure with additional capital and loans for Deutsche Bahn and to make further general savings." The legislature can now initiate discussions on the budget for the next year following the parliamentary summer break.
FDP parliamentary group leader Christian Dürr stated: "It was significant for us as the FDP that the 2025 budget complies with the debt brake." It's not an austere budget, but it invests at record levels in security, education, and infrastructure for roads and rail.
Key term: Under-spending
According to the federal government, the global under-spending will be reduced by around five billion euros to around 12 billion euros through the agreement. The budget passed in July had mentioned a global under-spending of approximately 17 billion euros.
Global under-spending refers to an overarching savings target in the budget. The federal government assumes that the ministries will not spend the entire amount in that year - for example, due to project delays. Planning a substantial billion-dollar gap is perceived as risky. Although the government expects this gap to decrease, among other things, due to economic development, the parliament now faces a substantial task in the budget negotiations, as the global under-spending is significantly larger than usual. The budget is expected to be finalized by the Bundestag in late autumn, with the first parliamentary debate scheduled for September.
There was already an agreement
In early July, Chancellor Scholz, Vice-Chancellor Habeck, and Finance Minister Lindner had already announced an agreement on the budget for 2025. They had previously battled for weeks to bridge a gap of at least 30 billion euros without resorting to severe austerity measures. The global under-spending of 17 billion euros was supposed to be closed by around eight billion euros. Discussions centered around whether Deutsche Bahn and the motorway company should receive credit-financed loans instead of direct budget subsidies, as well as funds for the state development bank KfW.
The role of the expert opinions
After the first agreement, Lindner had already pointed out that there were concerns about whether all the solutions being considered were feasible from a legal and economic perspective.
After two expert opinions raised doubts in certain areas, the coalition rejected the idea of using 4.9 billion euros from KfW instead of the gas price brake in the budget for other purposes.
There were debates over whether Deutsche Bahn and the motorway company could be supported without this being counted towards the debt brake. Lindner and Scholz held differing views on this, leading to further negotiations.
More equity for Deutsche Bahn
The government now plans for the infrastructure division of Deutsche Bahn AG to receive an additional 4.5 billion euros in equity, replacing the subsidies previously provided in the 2025 federal budget draft. Additionally, the Bahn is expected to receive a three-billion-euro loan from the federal government. Specifically, high-yield bonds on the market will be replaced by cheaper loans from the federal budget, alleviating both the Bahn and the federal government.
Initially, an increase in equity of around 5.9 billion euros was planned to enable the Bahn to invest in the modernization of the dilapidated rail network. According to the government, a total of 15.1 billion euros is now earmarked for rail infrastructure in the 2025 budget.
Higher track prices, a form of rail toll, are expected due to financial reasons. Rail associations fear that higher costs could hinder the transition of freight traffic to the rails.
Further measures
Two additional measures are planned to reduce the deficit. Around 300 million euros will be generated by an increased payment from the energy company Uniper to the federal budget. Uniper was nationalized during the 2022 energy crisis to secure energy supply for households and the economy. Additionally, the provision for the failure of tax revenues from the so-called EU energy crisis contribution will be reduced by 200 million euros.
No changes for Autobahn GmbH
The idea of loans for the federal-owned motorway company has been dropped, as the company currently lacks its own revenues for this purpose. In general, it is possible for the Autobahn GmbH to receive a portion of the revenues from the truck toll. However, it was stated that changes in the financing of the Autobahn GmbH require a "deeper debate."
As per the present blueprint, the Traffic Light coalition intends to shell out more than 480 billion euros in the immediate future, with approximately 10% of that sum borrowed. Nonetheless, this isn't set in stone, as the parliament, rather than the administration, holds the final say on the federal budget. The budget supervisors in the Bundestag typically make several adjustments to the draft prior to its approval just before Christmas, and occasionally even rescind trimming proposals put forth by the government.
The Ampel coalition is intent on revitalizing the ailing economy, maintaining social welfare, reducing the tax burden on citizens, and dealing with the tense global security situation through a series of measures.
"There were criticisms of the negotiators from within their own coalition too. Green party parliamentary deputy-president Andreas Audretsch told dpa: 'The back-and-forth between the finance minister and the chancellor was completely unnecessary. Nobody in Germany wants this bickering.'"
I'm not opposed to reallocating funds for state-owned Deutsche Bahn, but I insist on maintaining the debt control provisions of the Basic Law. Despite reaching an agreement, the federal government is still faced with a substantial financial deficit in the budget.
