German government agrees on 2025 budget

The German government today agreed in principle on a draft budget for the coming year and a "growth package".

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Dr Ralph Solveen

Commerzbank Economic Research

July 5 2024

The details will not be presented until July 17. However, it is already clear that the debt brake will be adhered to, although some budget gimmicks will probably be used. The economic consequences can only be roughly estimated when the detailed figures are presented. The most important consequence of today's agreement is that the coalition will probably remain together until the next regular federal election in the fall of 2025.

After lengthy negotiations, Chancellor Scholz (Social Democrats), Economics Minister Habeck (Green Party) and Finance Minister Lindner (FDP) today reached an agreement in principle on the 2025 federal budget and a "growth package". The agreement comprises three parts: A supplementary budget for 2024, the rough key points for the 2025 federal budget and measures to boost the German economy.

Supplementary budget 2024: 11 billion euros in additional debt

The supplementary budget for the current year will allow the federal government to take on an additional 11.3 billion in debt. This is probably primarily due to the weaker economy and therefore lower tax revenues as well as higher expenditure, particularly for social assistance ("Bürgergeld"). In addition, there is higher expenditure from the Climate and Transformation Fund (KTF), which is incurred in particular for price guarantees for producers of renewable energies. According to the Minister of Finance, this higher borrowing is also compatible with the debt brake due to the weaker economy.

For full text see attached PDF-Version.