German Chancellor Olaf Scholz smiles during a question and answer session in the Bundestag (lower house of parliament) in Berlin on July 3, 2024.
Ralf Hirschberger | Editorial photo via Getty Images
German government leaders agreed on the outlines of the country’s 2025 budget on Friday after intense negotiations to close a multi-billion-euro gap.
Chancellor Olaf Scholz said the budget was aimed at addressing “uncertainty” and “anxiety” in Germany, pointing out key items such as increased investment in defence spending and housing construction.
The draft budget will be scrutinised over the coming months: Chancellor Olaf Scholz confirmed on Friday that his cabinet will next meet on July 17 to approve the plan, but it will then be debated by the German parliament after the summer recess before being finalised by the end of the year.
Negotiations have been ongoing for weeks after ministries and agencies announced spending plans that exceeded budget limits by billions of dollars, and German Finance Minister Christian Lindner has previously said some ministries’ demands were excessive.
“Some departments are submitting outrageous wish lists, like Christmas, Easter and birthdays all combined,” Lindner said in May, according to Reuters. “This is unacceptable.”
Tensions have risen after a constitutional court ruling in late 2023 created a 60 billion euro ($64.8 billion) funding gap in the government’s budget plans for the coming years.
The government had planned to reallocate unused debt it had originally taken on as emergency funds during the COVID-19 pandemic into its ongoing spending plans.
The court’s ruling prompted the government to stop doing so, plunging the government into a budget crisis that sparked discussion of a national debt brake that would limit the amount of debt the federal government could take on and cap the maximum size of the structural deficit.
Debate over the merits of the debt brake, a cornerstone of German fiscal policy since 2009, has also resurfaced as part of the budget debate.
