Overview - The traffic lights have agreed on this for the 2025 budget
## Contents
- The Budget
- Pension Reform
- Climate and Housing
- Child Benefit and Kindergarten Places
- Boosting Economic Growth
- Bureaucracy Reduction
After lengthy negotiations, the heads of the traffic light coalition have agreed on the basic principles for the federal budget for the coming year. This budget will adhere to the debt brake requirements and contain measures to stimulate the economy. The news agencies DPA and AFP learned this on Friday morning from coalition circles. Sharpened sanctions for child benefits were also part of the agreement. Some details are still open.
Federal Chancellor Olaf Scholz (SPD), Finance Minister Christian Lindner (FDP), and Economics Minister Robert Habeck (Greens) have been fighting for a solution in the budget dispute since Thursday afternoon. The three coalition leaders will present the details of the budget plans at a press conference at 11 am. The following is known so far:
The Budget
According to information from "Handelsblatt," total expenditures in the budget are planned to be €470 billion in 2025. This would represent savings compared to the current year. In this year, expenditures are planned to be €476.8 billion. In addition, the coalition plans a supplementary budget of €11 billion for this year. The DPA learned this from government circles. A cabinet decision is expected to be made on July 17. The Bundestag will then have to deal with the plans before the budget can be passed in November or December.
Pension Reform
The planned pension reform has been agreed upon "on a clear timeline," said SPD parliamentary group leader Rolf Mützenich. It is financially secured that the pension package II will still be comprehensively debated in the Bundestag in the second half of this year and that the Bundesrat will make the final decision this year. For future pensioners, the pension level will be secured in relation to wage development. At the same time, contributions increases through returns from a new capital stock on the stock market will be dampened.
Climate and Housing
The so-called Climate and Transformation Fund seems to be secured, according to Mützenich. In particular, security will be provided for employees and their families. "We have also heard from the Federal Chancellor that child benefits are secure." The ban on converting rental apartments into ownership is also expected to come into effect.
Child Benefit and Kindergarten Places
Child benefit is to be increased by €5, just as the child supplement in child benefits for needy families in social benefits. This amount is to rise from €20 to €25 Euro per child per month and will expire with the introduction of the child minimum income. The child benefit, which all parents in Germany receive per child, is then to increase to €255 Euro per month according to the agreement.
Changes are also planned for the child tax allowance. It is to be raised, as the paper reveals, still this year by €228 Euro to €9,540 Euro. In the coming year, it is then to be increased by another €60 Euro to €9,600 Euro. The tax allowance is deducted from taxable income and therefore has a tax-reducing effect for families.
## Economic Growth Boost
The budget agreement includes "extensive relief measures" and stimulates economic growth, stated FDP Finance Minister Christoph Meyer to the news agency AFP. Employer contributions to pension and unemployment insurance for employees who already receive a pension are planned to be paid out as wages in the future.
In citizens' income, an "advance financing" will be introduced. Long-term unemployed who leave the citizens' income benefit to take a job will keep significantly more of their earnings in the first year, without this affecting housing benefits. "The welfare state is getting an efficiency update and incentives and sanctions in citizens' income will be optimized," said Meyer's deputy.
Additionally, tax credits are to be increased and the income tax rate is to be adjusted to inflation. It was further stated from government circles that there will be tax exemptions for overtime.
Bureaucracy Reduction
The traffic light coalition also wants to reduce bureaucracy. Binding practice checks are to be introduced in all ministries. Moreover, it was stated that data protection should be "de-sludged" to relieve small businesses in particular. The EU supply chain regulation is to be quickly converted into national law. For commercially used electric cars, there will be special depreciation allowances.
The traffic light coalition's agreed federal budget for the year will preserve child benefits, but with sharpened sanctions, as part of its adherence to the debt brake requirements. Household budgets may also benefit from increased child benefit, as the amount is set to rise from €20 to €25 per child per month. Additionally, the traffic light coalition is planning to reduce bureaucracy by introducing binding practice checks in all ministries and simplifying data protection regulations to ease the burden on small businesses.
