Overnight traffic light leaders convinced by budget result
In a night session, the coalition agrees on the draft for the budget 2025. The debt brake is in place, the deficit is growing less strongly, child benefits are rising. Chancellor Scholz also intends to significantly relieve the economy with billions. However, Finance Minister Lindner plans new debts.
Federal Chancellor Olaf Scholz expects an additional impetus for economic growth from the budget agreement. "The federal government has now completed its deliberations on the budget draft 2025. As announced, the cabinet will adopt the draft in its next meeting on July 17, that is, in twelve days," said the Chancellor at the joint press conference on the results of the budget deliberations with Economic Minister Robert Habeck and Finance Minister Christian Lindner.
This is a solution that fits perfectly with what Germany is all about, Scholz said. "And that's good for the stability of our country, good for the prosperity of our country, good for the security of our country, and incidentally also good for the government," so Scholz.
At the same time, a supplementary budget for 2024 will be passed and a growth initiative will be launched. "With this budget, we create security and stability in times that are marked by unrest and insecurity," Scholz said. Regarding the deliberations, he said: "Sleep will be overshadowed. We have gone through a long negotiation process and have talked a lot to be able to present a budget draft today at the end of this session week."
Scholz, Habeck, and Lindner had previously reached a political agreement on the federal budget for the coming year after a long negotiation night. The budget still needs to be approved by the cabinet and the Bundestag.
Billions in Relief for the Economy
In addition, Scholz has announced billions in relief for businesses in Germany. The SPD politician said that depreciation conditions should be improved. Investments should be able to be made tax-deductible more quickly. Additionally, the research grant is planned to be expanded. Planned are also subsidized loans through the state development bank KfW to better support the economy.
Vice Chancellor and Economic Minister Habeck spoke of a new economic dynamics. In Germany, only a mini-economic growth is expected this year. Scholz also mentioned the abolition of bureaucracy. Every year, a bureaucracy reduction law is planned. Furthermore, according to Scholz, the so-called electricity price compensation is to be extended until 2030. The Chancellor spoke of billions in relief for the German economy. The government will also take measures to reduce network costs.
Lindner plans 44 billion Euro in new debts
The federal government plans to take on new debts in the amount of 44 billion Euro in the coming year. This will take place within the framework of the debt brake, said Finance Minister Lindner. Planned expenditures amount to 481 billion Euro, of which 57 billion Euro are for investments. This is "not a savings budget." Every stone in the budget has been turned over where savings could be made.
Through the proposed supplementary budget for 2024, the net credit take-up within the debt brake will increase to 50.5 billion Euro. No provisions will be made for 2025. Lindner mentioned, looking back on the lengthy negotiations, that he had met with Chancellor Olaf Scholz and Vice-Chancellor Robert Habeck a total of 23 times, spending approximately 80 hours in deliberations.
The contested Supply Chain Act is expected to apply to significantly fewer companies than before. Two-thirds of the companies would no longer fall under the German regulations for respecting human rights and environmental violations in their supply chains, according to Lindner. The implementation of the European Supply Chain Act will also be delayed as much as possible.
Defense budget to reach 80 billion Euro by 2028
The coalition led by the Greens plans to significantly increase the defense budget in the medium-term financial planning after the special fund for the Bundeswehr has been exhausted. "From 2028 onwards, that is, after the special fund has been completely spent, the regular defense budget will then amount to 80 billion Euro to ensure the two percent," Scholz said.
He emphasized defense spending as an important point of agreement, although Defense Minister Boris Pistorius' demands for an increase of more than 6 billion Euro in the coming year will not be met. Scholz stated, "It's about a strong defense, a strong Bundeswehr, that provides protection against the aggressive dictators of our time."
Child benefit increase to take effect from 1st January
The planned increase in child benefit and the child supplement is expected to come into effect from the 1st of the next year, according to Lindner. Both benefits are to be increased by five Euro per month, as Lindner explained. This would raise child benefit from its current 250 Euro monthly to 255 Euro, and the child supplement for families receiving social welfare would increase from 20 Euro to 25 Euro per month.
Two billion Euro annually is earmarked in the federal budget for 2025 for childcare in daycare centers, Lindner announced. This is not just a matter of family policy but also strengthens the growth potential of the country, the Minister emphasized. Due to a lack of daycare places, many are still working part-time or have given up work entirely. The investments are intended to help address this issue.
At the same time, the state will continue to invest in education and research. The Start Chance program for offers at schools is secured with federal funds of one billion Euro "for the next few years," Linders said. In contrast to the "Opposition in the German Bundestag," the coalition was not interested in saving on educational opportunities for children and adolescents.
Olaf Scholz commended the budget agreement, stating that it aligns with Germany's stability, prosperity, and security. However, Finance Minister Christian Lindner revealed plans for new debts, totalling 44 billion Euro, within the framework of the debt brake. Meanwhile, Vice Chancellor Robert Habeck spoke of a new economic dynamics, with Scholz announcing billions in relief for businesses through tax deductions, expanded research grants, and subsidized loans.
