German Chancellor Olaf Schulz smiles while being questioned at the Bundestag (lower house of parliament) in Berlin on July 3, 2024.
Ralph Hirschberg | AFP | Getty Images
After intense negotiations, German government leaders agreed on Friday on the outline of the country’s 2025 budget to make up for a multi-billion-euro shortfall.
“With this budget, we are creating security and stability in an era of insecurity and uncertainty,” German Chancellor Olaf Scholz said, according to CNBC.
Scholz pointed to several key points in the budget, which he said included “record investments.”
“This is about strong defence, strong (German military) protection against the aggressive tyrants of our time. So we will achieve the 2 percent annual NATO target,” he said, referring to the NATO allies’ Commit to spending at least 2% of GDP on defense spending.
He added that more funds would be allocated for home construction and affordable housing, noting that the amount would reach “billions of dollars.”
Scholz said the budget also includes an economic growth plan. Among other things, he explained, it aims to increase investment incentives, reduce bureaucracy and ensure affordable energy.
The budget bill still faces months of scrutiny. Scholz confirmed on Friday that his cabinet would sign off on the plan at its next meeting on July 17.
Negotiations have been ongoing for weeks after spending plans shared by ministries exceeded limits by billions. German Finance Minister Christian Lindner previously said that the demands of some departments were excessive.
“Some departments have submitted wish lists that are exorbitantly high – as much as Christmas, Easter and birthdays combined,” Lindner said in May, according to Reuters. “That’s unacceptable.”
A Constitutional Court ruling in late 2023 widened a 60 billion euro ($64.8 billion) funding gap in the government’s budget plans for coming years, exacerbating tensions.
The government has been planning to reallocate unspent debt initially used as emergency funding during the Covid-19 pandemic into its ongoing spending plans.
The court ruling blocks that and plunges the government into a budget crisis, sparking discussions about the country’s debt brake, which limits the amount of debt the federal government can take on and caps the maximum size of its structural deficit.
The debt brake has been a cornerstone of German fiscal policy since 2009, and discussion around its merits has resurfaced as part of budget discussions.
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