Traffic lights agree on 2024 budget

Federal Government - Traffic lights agree on 2024 budget - details open

After days of negotiations, the leaders of the traffic light coalition have reached an agreement on the federal budget for 2024. Chancellor Olaf Scholz (SPD), Vice-Chancellor Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) plan to discuss the details in Berlin on Wednesday afternoon. According to information from the German Press Agency, a coalition committee is planned for the afternoon.

This means that almost four weeks after the ruling by the Federal Constitutional Court, a solution to the budget crisis, which has put the coalition government under considerable pressure, has been found. Since then, the coalition leaders have been discussing how to plug a 17 billion euro hole in the budget for the coming year. They also discussed the financing of numerous investments in climate protection and the modernization of the economy. Following the ruling, 60 billion euros are missing from the so-called Climate and Transformation Fund, which had already been firmly planned for the coming years - around 13 billion euros in 2024 alone.

The judges in Karlsruhe had declared a reallocation in the 2021 budget null and void and ruled that the Federal Government may not set aside emergency loans for later years.

Agreement in night session

On Tuesday morning, Scholz, Lindner and Habeck met again at the Chancellery after they had adjourned their talks the night before once again. Later, they brought in the heads of the Ampel parliamentary groups, went to their parliamentary groups themselves and then withdrew to the Chancellery again in a small circle. In the end, an overnight meeting was obviously necessary. The agreement was reached early Wednesday morning, just in time for Scholz to make his government statement at 1 p.m. and probably leave for Brussels that evening. An EU summit is taking place there until Friday.

Austerity resolutions expected - and what about the debt brake?

It was not initially known what solution Scholz, Habeck and Lindner came up with. Among other things, the suspension of the debt brake for 2024 was discussed. The Basic Law allows higher borrowing in special emergencies. The SPD and Greens had argued that the war in Ukraine could be such an emergency. However, the FDP did not see the legal requirements for this. The CDU/CSU has already indicated that it may take the matter to the Federal Constitutional Court again if the debt brake is suspended.

Tough austerity measures in various areas were also debated. It was said that hundreds of budget items could be touched in order to raise the necessary billions.

The FDP wanted to review social benefits and certain subsidies in particular. The planned increase in the citizen's allowance, for example, was controversial. Chancellor Scholz ruled out any cuts to social benefits, but at the same time the SPD said that the accuracy of the benefits would have to be discussed. Family Minister Lisa Paus (Greens) said on RTL/ntv's "Frühstart" on Wednesday morning that she did not expect any cuts to be made to basic child benefits.

The Greens called for a reduction in climate-damaging subsidies, which they believe include tax benefits for diesel and agricultural and forestry businesses. This would provide the state with more revenue and therefore more leeway.

Impact on electricity prices?

What would become of a federal subsidy worth billions for grid fees also remained open at first. The SPD, Greens and FDP actually wanted to pay up to 5.5 billion euros in 2024 to proportionally finance the transmission grid costs. Grid fees are a component of the electricity price.

Without the subsidy, prices for end customers would rise significantly, the German Association of Energy and Water Industries (BDEW) has already warned. The comparison portal Verivox calculates annual additional costs of around 100 euros for a family with an electricity consumption of 4,000 kilowatt hours.

The Climate and Transformation Fund was concerned, among other things, with major projects such as the 10 billion euro funding for chip manufacturer Intel. However, Scholz had already made it clear in advance that this money would still flow if possible.

Budget resolution in the Bundestag planned for January

The coalition government actually wanted to pass the budget for 2024 before the end of the year, but it was already clear last week that this would not be possible due to consultation times in the Bundestag and Bundesrat. Now, at least the Bundestag Budget Committee could possibly complete its deliberations before Christmas. However, this depends on how extensive the budget amendments proposed by the leading politicians are. The Bundestag could then meet in January for the budget week and adopt the budget, after which the Bundesrat could give the green light.

Until then, a so-called provisional budget would apply. For the time being, only expenditure that is necessary to maintain the administration and fulfill legal obligations is possible. In practice, however, the Ministry of Finance can authorize the ministries to use a percentage of the funds in the unapproved draft budget each month.