Federal Government - "Gesamtkunstwerk": Traffic light agrees on budget
After months of negotiations, the leaders of the Traffic Light Coalition have reached a understanding on a budget for 2025 and a package to boost the economy. Federal Chancellor Olaf Scholz referred to it as a "masterpiece" that is good for the stability of the country, as well as for the Traffic Light Government. The SPD and Greens were unable to push through their demand for another suspension of the debt brake. However, the agreement includes investments of 57 billion Euro. "It's not at all a budget cut," said Finance Minister Christian Lindner.
For parents, there will be an increase in child benefit of five Euro at the beginning of the coming year. The defense budget is expected to grow by around 1.2 billion Euro from roughly 52 billion Euro - significantly less than Minister Boris Pistorius (SPD) had demanded. The economic stimulus package with 49 measures is expected to lead to additional growth of more than half a percent in the next year, approximately 26 billion Euro in additional economic output. Planned measures include accelerated depreciation of investments and improved research grants.
The plans should be finalized by July 17 and then be decided in the cabinet. The Bundestag will deal with the matter for the first time in September. Scholz expressed optimism that this agreement, unlike the previous one, will not be renegotiated. "It is the firm intention of all parties involved that it will not run the same way as the last time."
Scholz after marathon negotiations: "Everything's great"
Extremely intense negotiations preceded this agreement. It was even speculated that the coalition could break apart over the budget issue. Scholz met with Lindner (FDP) and Economics Minister Robert Habeck (Greens) a total of 80 hours to discuss the budget. The last round lasted eleven hours and ended between 5 and 6 am on the Friday morning. Scholz then went directly to the SPD fraction, which had already scheduled a special session on Wednesday to increase the pressure on the coalition leadership. When the Chancellor emerged after one and a half hours, he said only: "Everything's great."
His fraction is not quite as enthusiastic. They had strongly demanded the suspension of the debt brake to have more room for investments. The FDP opposed this, which continues to cause significant unrest in the SPD. SPD fraction leader Rolf Mützenich could not hide his dissatisfaction after the session of SPD deputies. "Given that the Federal Chancellor had to involve all ministers and ministers of state so early on, [...] that does not directly speak for the person who is then responsible for this budget draft," he stated against Lindner - so soon after the agreement rather unusually.
The FDP is quite satisfied - the SPD wants to examine it closely
The budget agreement also failed to ignite enthusiasm among the Greens. Fraktion leader Katharina Dröge stated that they would examine the spending plans for each ministry very carefully. "Especially in the areas of internal and external security and humanitarian aid, in our opinion, the budget does not do justice to the situation in the country." The FDP is essentially pleased - debt brake not weakened, growth package on the way, everything set.
Nevertheless, the traffic light coalition leaders gathered once again barely a year before the next federal election. "Losing our nerves, giving up, abandoning responsibility - I as Federal Chancellor would have no understanding for that," said Scholz regarding the speculations about a traffic light coalition collapse. Germany needs to be a stability anchor in Europe during this time of growing uncertainty.
The only uncertainty left is whether consensus in the parliamentary procedure will be re-established again. The budget is still only under the roof when the Bundestag passes it in the fall. The long way to this point was made clear by Mützenich: "The members of the German Bundestag, my faction, will evaluate the individual plans and then examine exactly what needs to be changed, what we can also take on." The declaration of a state of emergency in the budget remains an instrument he is holding onto.
Pistorius among the losers
Defense Minister Boris Pistorius (SPD) and the self-proclaimed "turning point" are among the losers in the great ring. The 100 billion euro special fund for the Bundeswehr is already planned, but it is still being counted towards the two percent target. "We are talking about an additional 6.5 to 7 billion euros in requirements for the coming year," Pistorius said in May in New York and warned against a "weapons stop." Now he has received 1.2 billion euros. There is a gap to the need, as the operating costs of the armed forces are also rising. Central projects such as the purchase of combat tanks, air defense systems, and frigates have already received the green light from the budget committee. Others - the planned purchase of submarines, missiles, or long-range artillery - are moving far away.
Scholz said, "It's about a strong defense, a strong Bundeswehr, which offers protection against the aggressive tyrants of our time." In 2028 - between federal elections - the defense budget will grow to 80 billion euros.
Reforms in social benefits
The traffic light coalition is focusing on employment and social issues in the budget after the FDP demanded cuts in the social sector. Long-term unemployed will receive a bonus if they take on a regular job. On the other hand, the monitoring of whether offered work is accepted will be tightened.
Lindner announced "reforms in social benefits": Contribution requirements will be tightened. New reporting obligations for people temporarily available on the labor market will be introduced: Those affected should report monthly, bureaucracy-free, to the Federal Employment Agency. Regulations as to which offered work is considered acceptable will be further developed. The waiting periods for social benefits will also be halved, according to Lindner. Today, enhanced allowances on assets and the suspension of tests for housing costs apply in the first year after the first application for social benefits.
- Christian Lindner, the Finance Minister, stated that the budget is not a cut, despite the investment of only 57 billion Euro.
- The Household sector may see an increase in child benefit by five Euro at the beginning of the next year.
- The Special meeting between Scholz, Lindner, and Habeck lasted for 80 hours before reaching an agreement on the budget.
- Boris Pistorius (SPD), the Defense Minister, had demanded a higher defense budget increase, but only received an additional 1.2 billion Euro.
- The Traffic light coalition leaders, including Christian Lindner, are satisfied with the agreement, despite disagreements within their parties.
- The economic stimulus package, with 49 measures, is expected to boost Germany's economy by more than half a percent and provide additional economic output of approximately 26 billion Euro.
- The FDP is pleased with the budget agreement, as it did not weaken the debt brake, and a growth package is on its way.
- The SPD and Greens will closely examine the budget agreement, especially in the areas of internal and external security and humanitarian aid, as they believe it does not adequately address the current situation in Germany.
