Household - NRW plans billions in debt and turns to austerity measures
Weak conjuncture and insufficient tax revenues: For the first time, the black-green state government in North Rhine-Westphalia uses an exception to the debt brake and incurs billions in debts. In response to the persistent weak economic development in Germany and poor tax forecasts, the state intends to use the so-called conjunctural component in the supplementary budget 2024 and also in the budget proposal 2025, as Finance Minister Marcus Optendrenk (CDU) announced.
According to the cabinet-approved budget draft, borrowing authorizations in the amount of 1.34 billion Euro for the budget 2025 can be taken up through this possibility. For the supplementary budget 2024, credits in the amount of two billion Euro could be used. Saving further against foreseeable revenue shortfalls in the budget 2024 would be irresponsible, Optendrenk stated. The conjunctural component will, however, only be used "in the strictly necessary extent".
Record budget - and still saving
Although the budget volume for 2025 is expected to increase by around three percent - approximately three billion Euro - to a previous record level of 105.5 billion Euro, not all external burdens can be absorbed. Therefore, the ministries must save around 3.6 billion Euro. "We have to do things that hurt," said the CDU politician. "I regret that some things are not financially possible now."
The vast majority of the savings can be raised by the ministries from their so-called self-management funds. These are extra funds for unplanned expenses. However, one billion must be saved in earnest - and for that, proposals must be made. It's about "thousands of positions," Optendrenk said. No additional positions will be created for all ministries.
Optendrenk spoke of "extremely challenging framework conditions". Through political decisions at the federal level such as the abolition of the cold progression, housing allowance increases, or the Germany ticket, the state budget has been permanently burdened with an additional four billion Euro per year since 2023. At the same time, the state budget is also being pressured by the high price increases of the past years, significantly higher wage agreements, and the increased interest rates.
Debts must be repaid in better times
The debt brake enshrined in the Basic Law stipulates that budgets of the Federation and the States must generally be balanced without borrowing from own revenues. The conjunctural component allows for the taking on of new debts in economically weak periods. These debts must, however, be repaid in economically better times as soon as possible.
This could soon be the case, as conjuncture researchers expect a somewhat stronger recovery in this year than previously assumed. Against the backdrop of the strained budget situation of the Federation and the States, demands from parties and economic experts to relax the debt brake have been growing louder for months.
Billions for education and OGS expansion
Expenditures for education alone will increase by around 3 billion Euro in 2025 and reach a record level of nearly 42 billion Euro. Thus, an additional 50,000 full-day care places in the primary school sector (OGS) should be created in the coming year. From the school year 2025/26, more than 480,000 OGS places could be financed with this - an increase of 56 percent since 2017.
The state government must hurry up with the OGS expansion. Starting from 2026, according to federal law, there will be a bundesweit (nationwide) legal claim for a place in extended school hours (OGS) that begins with the 1st grade and grows to the 4th grade in the 2029/30 school year. Education minister Dorothee Feller (CDU) is confident that NRW will reach this goal.
Criticism of the absence of an OGS law
However, there will still be no law for the legal securing of the OGS expansion with binding standards, as promised in the black-green coalition contract. Instead, the expansion is being secured through a decree. Education associations reacted disappointed. "Without binding guidelines, the quality of extended school hours will depend on the location and therefore be a matter of luck," criticized the Association for Education and Upbringing (VBE).
Entry into the old debt regulation
As promised, black-green will also enter the old debt regulation for the communes in 2025 and will pay in 250 million Euros for the first time. He now expects the federal government to implement its coalition agreement and participate, says Optendrenk. In total, the communes will receive almost 16 billion Euros according to the Community Financing Act and further allocations of over 20 billion Euros. Therefore, more than every third Euro from the state budget goes to the communes.
Corona debts must be repaid
The land also has to repay the billions in loans from the Corona rescue shield and the special fund for dealing with the consequences of the Ukraine war. Already in April, planned Corona loans in the amount of 3 billion Euros were repaid and cancelled. For the years 2025 to 2028, annual repayments of 350 million Euros are planned.
Opposition demands more fiscal discipline
"The current fiscal policy of CDU and Greens must be stopped immediately, demanded FDP fraction leader Henning Höne. Instead of taking on new debts, the government should focus on budget discipline and frugality.
SPD fraction leader Jochen Ott said: "The black-green coalition is at the end of its financial policy." Once again, the reckless state government has missed the chance to tackle the problems in the country with a real investment budget. "It's time to grab the oars and actively engage in this economically challenging situation," said Ott. "The stern reference to the debt brake is holding back the future of our children."
- Marcus Optendrenk, as the Finance Minister of North Rhine-Westphalia's black-green state government, announced the use of the debt brake exception.
- The black-green coalition government in NRW, led by Minister Optendrenk (CDU), is responding to Germany's weak economic development and poor tax forecasts.
- In response to the persistent economic situation, the government plans to use the conjunctural component in the supplementary budget 2024 and the budget proposal 2025.
- The budget proposal for 2025 in North Rhine-Westphalia is expected to increase, with the state government aiming to save around 3.6 billion Euro despite the record budget.
- Optendrenk highlighted the need for saving measures to counter foreseeable revenue shortfalls in the budget 2024, stating it would be irresponsible to avoid this.
- The Green Party member of the government, Education Minister Dorothee Feller (CDU), plans to finance more than 480,000 additional OGS places by 2025/26.
- The Association for Education and Upbringing (VBE) criticized the black-green government's absence of an OGS law, stating it could lead to varying quality standards in different areas.
- The opposition, led by Henning Höne from the FDP, is demanding fiscal discipline from the CDU and Greens, focusing on repaying debts instead of taking on new ones.
