The budget head has given his approval.
Got history with spending, swapping, and debates - but now, the new federal budget's here. The mid-July truce had to be tightened due to the risk of constitutional violations. Now, it's time. In theory, the SPD, Greens, and FDP leaders agreed last Friday. Now, the new budget is also submitted to the Bundestag. Here's a breakdown of the document:
Banking on Unspent Funds
Despite the agreement, there's still a deficit in the budget. The global underutilization totals 12 billion euros - bigger than the federal government initially intended. They're hoping that ministries won't spend their full allocation for that year. This has happened in recent years, with billions left over. However, a deficit of this magnitude is unusual.
The coalition government aims to spend approximately 490 billion euros next year, with about 10% on credit. But this isn't set in stone, as the federal budget depends on the parliament's decision. The budget holders in the Bundestag typically make modifications before the decision, often reversing some of the government's proposed cuts.
Key Figures from the Draft Budget
The budget for the upcoming year is estimated at 488.6 billion euros, around 300 million less than this year. The Ministry of Finance has allocated 81 billion euros for investments - a record high. Finance Minister Christian Lindner plans to borrow an additional 51.3 billion euros, slightly more than this year. This can be done within the debt limit according to the Basic Law.
The coalition wants to use its budget to boost the struggling economy, maintain social benefits, lighten the tax burden, and address the tense international security situation. The largest expenditure is the social budget, with 179 billion euros planned, mostly for legally guaranteed benefits such as citizen's income.
Will the Bundeswehr Get Enough Funds?
Defense Minister Boris Pistorius will receive additional funds, enabling Germany to surpass the NATO target of 2% of GDP. The defense budget is set at 53.25 billion euros, an increase of 1.3 billion, but still far below the 58 billion Pistorius originally requested. He views this as insufficient given the international security situation and potential threats to Germany.
There will be around one billion more for security authorities, including the Federal Police and the Federal Criminal Police Office.
What's in it for Families?
Beginning January, families will receive an extra 5 euros per month and child in child benefit - 255 euros instead of the current 250 euros. By 2026, this will increase to 259 euros per month and child. The child immediate supplement, which aids families with low incomes, will also increase by 5 euros per month and child from January.
What Changes for Every Taxpayer?
The federal government is increasing tax allowances in the tax return. The cabinet has already approved an increase in the basic allowance, where no income tax is paid, to 12,084 euros next year from the current 11,784 euros. Consequently, the child allowance will also increase by 60 euros to 6,672 euros next year.
To combat inflation, income thresholds for higher tax rates are being moved - except for the top tax rate, which remains at 45% above the highest tax rate.
What the Traffic Light Coalition is Doing for the Economy
The SPD, Greens, and FDP have tied a package for more economic growth. According to the Ministry of Finance, this is expected to result in additional growth of more than half a percent - and thus ultimately also around six billion euros more in tax revenues.
Planned measures include improvements to depreciation on investments. The coalition wants to reduce bureaucracy and relieve energy-intensive companies from electricity price increases. Employees are to be given incentives to work more and longer. There will also be tax incentives for foreign skilled workers.
Rent Subsidy
The cabinet has already initiated this: Beginning January, there will be an average of 30 euros more in housing benefit. This monthly rental subsidy for citizens with low incomes will be reviewed and adjusted to inflation and rent increases every two years. Due to increases in rent, energy, and food, the subsidy will rise by an average of 15%.
The Commission needs to approve the modifications made to the budget by the federal budget holders in the Bundestag before it becomes final. Following the submission of the new budget to the Bundestag, The Commission will scrutinize it to ensure it adheres to EU budgetary rules.
