Debt brake continues

German coalition reaches agreement in budget dispute

Federal Chancellor Olaf Scholz (SPD) and Economics Minister Robert Habeck (Greens)

(Bild: APA/AFP/RALF HIRSCHBERGER)

After lengthy negotiations, the leaders of the German coalition government have achieved a breakthrough on the 2025 budget and the growth package. According to the agreement, the coalition also wants to adhere to the debt brake in the coming year ...

This was revealed to Deutsche Presse-Agentur by coalition circles following consultations between Chancellor Olaf Scholz (SPD), Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens). The coalition leaders had been holding intensive talks since Thursday afternoon. The parliamentary groups of the SPD and the Greens will meet at 7.00 am.

Scholz, Habeck and Lindner had negotiated frequently in recent weeks. They had actually wanted to reach an agreement by Wednesday. Now July 17 is being discussed for the cabinet decision. In order to reach this date, an early agreement in principle was necessary because the drafting of the budget law usually takes around ten days. From mid-September, the Bundestag will discuss the draft budget, which could then be passed in November or December.

(Bild: dpa/Armin Weigel)

Individual departments such as the Foreign Office or the Development Ministry were initially unwilling to accept Lindner's savings targets in view of international obligations. The social budget was also controversial. In addition, there was still a gap of around 10 billion euros that needed to be closed. The SPD, in particular, pushed for the debt brake to be suspended again in order to have more leeway for investments, in view of the financial burdens caused by the war in Ukraine. This was out of the question for Lindner's FDP. The SPD rejected cuts to the social budget.

Only mini-growth expected in Germany
Only mini-growth is expected in Germany this year. Companies are holding back on investments and private consumption is not picking up either. Business associations have long complained about the disadvantages of Germany as a business location, such as a high tax burden, a shortage of skilled workers and too much bureaucracy.

This is where the government wants to start with the "growth turbo". Scholz had already said that the federal government wanted to promote private investment. He held out the prospect of improved tax write-offs for companies. In addition, the employment of parents should be made easier and incentives to work should be increased, including tax incentives.