Federal Government - Traffic light agrees on budget - package for more growth
The heads of the traffic light coalition have agreed on a federal budget for 2025 and a growth package for Germany after lengthy negotiations. Parents will receive an increase of five Euros in child benefit at the beginning of the coming year. The defense budget is expected to grow by approximately 1.2 billion Euros - significantly less than demanded by Minister Boris Pistorius (SPD). The rules for people on social welfare are to be tightened. Chancellor Olaf Scholz (SPD) admitted after a final marathon session of the coalition heads: "We don't make it easy for ourselves."
23 meetings for the budget
Speculations about a possible coalition breakdown, which had grown louder in the past few days, were countered by Scholz: "Losing our nerves, giving up, running away from responsibility - I as Chancellor would have no understanding for that." Germany needs to be a stability anchor in Europe in this time. Scholz, Finance Minister Christian Lindner (FDP), and Economics Minister Robert Habeck (Greens) had reportedly met 23 times for the budget. It was necessary until five in the morning to plan the federal expenditures for the coming year. The budget still needs to be passed in the cabinet and in the Bundestag.
FDP succeeds in debt brake
The FDP succeeded in the debt brake. The agreement on the budget and the financial plan up to 2028 provides for compliance. A state of emergency should therefore not be declared. The government plans new debt in the amount of 44 billion Euros for the coming year - within the debt brake, as Lindner assured. Planned are expenditures of 481 billion Euros, of which 57 billion Euros are investments. This is "not at all" about a savings budget. Every stone in the budget has been turned over where savings could be made. For the current year, a supplementary budget is planned. In 2024, the net credit take-up in the context of the debt brake is to increase to 50.5 billion Euros.
Half a percent economic growth through package
Comprehensive relief measures are planned to boost the economy. The package is expected to lead to additional economic output of more than half a percent in the next year - 26 billion Euros in additional economic performance are possible. Thus, accelerated depreciation of investments and improved research grants are planned.
The government is focusing on employment and social issues, as the FDP had demanded cuts in the social sector. Long-term unemployed are to receive a bonus if they take up a regular job, as Habeck announced. On the other hand, the monitoring that offered work is actually taken up is to be stricter, so Habeck.
Reforms in social benefits
Lindner announced "Reforms for Citizen's Benefit": Contribution obligations would be tightened. New reporting requirements for people temporarily available on the labor market would be introduced: Affected individuals would have to report bureaucracy-free to the Federal Employment Agency monthly. Rules regarding which offered work is considered acceptable would be further developed. The waiting periods for social benefits would also be halved, according to Lindner. Currently, enhanced allowances on assets and housing costs examinations are granted in the first year after the first Citizen's Benefit application.
Habeck announced that 100,000 people receiving Citizen's Benefit would no longer need it due to these measures, resulting in savings in the three-digit million range. Labor Minister Hubertus Heil (SPD) emphasized that the effectiveness of the social safety net would increase - the government, however, is not reducing social benefits. Habeck emphasized that the stimulation of the labor market and the reduction of the skilled labor gap have "the greatest growth potential." For example, future foreign labor offices would only have 14 days to object to a job application from a foreigner in Germany - otherwise, employment would be considered approved.
More Money for Longer Working
Working beyond retirement age should be more attractive, according to Lindner. Employed individuals would receive employer contributions for the Unemployment Insurance and, in part, for the Pension Insurance in the future. For foreign skilled workers, a tax deduction in the first three years of their employment in Germany would be granted.
Further focuses that the Traffic Light Coalition intends to set with its budget and growth package: Relief from bureaucracy, tax exemption for overtime, special deductions for commercially used electric cars.
Faeser satisfied with security expenditures
Bundesinnenminister Nancy Faeser (SPD) expressed satisfaction. The protection of people in Germany will be strengthened with strong investments in internal security. From government circles, it was said that there would be 1,000 additional police officers and policewomen at the Federal Police in the coming year. Lindner announced an additional billion Euros more than previously planned for security authorities. The Civil Protection, the Technical Relief Organization (THW), and the Customs were also supposed to be better equipped according to government announcements.
New dispute possible
Disputes between the Greens and the Traffic Light Coalition over the budget could arise soon. The Greens expect difficult negotiations in the Bundestag. Fraktionschefin Katharina Dröge said: "In our view, the budget does not do justice to the situation in the country in the areas of internal and external security and also humanitarian aid." SPD-Fraktionschef Rolf Mützenich said after a meeting with his MPs: "Our members of the German Bundestag, my faction, will now evaluate the individual plans, the individual things, and then exactly look at what needs to be changed, what we can also contribute." The declaration of a budget crisis situation was kept as an instrument.
Scholz growing
Scholz grew.
After the long night of negotiations, Scholz greeted his faction in the Reichstag building at 7:03 am with a smile. "Are you all awake?", was the first thing Scholz said. Mützenich had put pressure on Scholz, Habeck, and Lindner with the invitation to the special session. A postponement of the decision over the summer break was to be prevented. The draft is supposed to be decided in the cabinet on July 17th.
- The SPD, FDP, and Greens, collectively known as the traffic light coalition, have agreed on a growth package and a budget for Germany in 2025, which includes an increase in child benefit and a growth in the defense budget.
- The defense budget is expected to increase by approximately 1.2 billion Euros, less than what Minister Boris Pistorius (SPD) had demanded.
- finance Minister Christian Lindner (FDP) was successful in implementing the debt brake in the agreement on the budget and financial plan up to 2028.
- Olaf Scholz, Chancellor of Germany, admitted that the coalition heads made the process challenging, stating, "We don't make it easy for ourselves."
- Chancellor Scholz emphasized the importance of Germany as a stability anchor in Europe and called out those who may have given up or lost their nerves.
- The SPD, FDP, and Greens met 23 times to negotiate the federal expenditures for the coming year, with the budget still needing to be passed in the cabinet and the Bundestag.
- Robert Habeck, the economics minister, announced plans to provide comprehensive relief measures to boost the economy with the growth package, leading to an additional economic output of more than half a percent.
- Labor Minister Hubertus Heil (SPD) emphasized that the effectiveness of the social safety net would increase with the proposed reforms, although the government is not reducing social benefits.
