Federal budget: At the compromise limit: What the traffic light coalition wants to spend money on

Finance Minister Christian Lindner once again made it clear how close the budget negotiations were: “We spared no effort in pushing the limits of the ability to compromise within the cabinet,” said the FDP chairman as he presented the budget for 2025 in Berlin. Shortly before, the laboriously fought-for draft had cleared the first official hurdle: It was approved by the federal cabinet, and can now be passed on to the Bundestag.

The traffic light government plans to spend more than 480 billion euros next year, almost a tenth of which will be on credit. However, some ideas are still on shaky ground: whether the traffic light plan will work is still being examined under constitutional law. A budget resolution in the Bundestag is scheduled for the end of November.

But as difficult as it all seems this time, it could still be trumped by future budgets, warns Lindner. “Considerable efforts lie ahead of us.” This applies above all to the 2028 budget, with an extraordinary planning gap of around 39 billion euros. Then Germany must reach the two percent target for defense spending without the special fund for the Bundeswehr. “We will have to talk about resolving this need for action in this country,” stressed Lindner. A “political decision on direction” is necessary. He means the fundamental question: higher taxes and debt, yes or no? He himself is therefore “very motivated” to continue to be finance minister after the next federal election.

The most important figures from the 2025 budget

Overall, the budget for next year has a volume of 480.6 billion euros. That is around eight billion less than this year. The Ministry of Finance has allocated 78 billion euros for investments – a record level.

Lindner is planning new loans of 43.8 billion euros – also slightly less than this year. According to the Basic Law, the federal government is allowed to borrow this money despite the debt brake. The SPD and the Greens are still toying with the idea of ​​making an exception for higher loans in the parliamentary process, but the FDP is against it.

The main focus

With the 2025 budget, the traffic light coalition wants to simultaneously stimulate the economy, maintain social benefits and deal with the tense international security situation. Defense Minister Boris Pistorius (SPD) will receive additional money so that Germany will exceed the NATO quota of two percent of gross domestic product. The Federal Police, Federal Criminal Police Office and other security authorities will be strengthened with around one billion euros.

In addition, families will be supported by higher child benefit and a higher child allowance for working parents with low wages. Overall, tax relief of around 23 billion is planned for 2025 and 2026, including through an increase in allowances for wage and income tax.

No austerity budget

When it comes to negotiations, Lindner likes to portray himself as tough. A balanced budget is only possible “by curbing politicians’ appetite for ever higher government spending,” he said in a video published by his ministry.

His ministerial colleagues must learn to limit themselves. “The main task was to bring the individual ministries into line with the so-called financial plan, i.e. what had already been planned in terms of state revenue,” says Lindner.

In fact, a comparison of the draft budget with the financial plan for 2025 drawn up last year shows that Chancellor Olaf Scholz (SPD), Economics Minister Robert Habeck (Greens) and Lindner have not put together such a tough austerity budget. Almost all ministries will ultimately receive more money than was promised to them last year.

Above all, Transport Minister Volker Wissing (FDP) is allowed to spend more money, as are Education Minister Bettina Stark-Watzinger (FDP), Interior Minister Nancy Faeser (SPD), Family Minister Lisa Paus (Greens) and Defense Minister Pistorius. The Ministry of Economic Affairs and the Ministry of Development, on the other hand, have to make do with more or less what Lindner was willing to grant them last year.

The bet on economic growth

The fact that there are no major savings also means that tricks are needed to balance the budget. For example, Lindner wants to record interest payments differently in the budget in the future. He also hopes that a package for more economic growth, the key points of which were also approved by the cabinet, will bring in around six billion euros more in tax revenue. Improvements to investment depreciation are planned, and the traffic light coalition also wants to reduce bureaucracy and reduce electricity prices for energy-intensive companies. Employees should be given incentives to work more and for longer. There should also be tax incentives for foreign skilled workers. Tighter rules are planned for those receiving citizen’s allowance.

The eight billion trick

And then there is the so-called global underspending of 17 billion euros. This is the federal government’s bet that the ministries will not spend all of the money in the year anyway. This is a common practice, but the amount is very high.

The 17 billion also includes eight billion euros, for which the federal government already has an idea for financing, but which may be constitutionally shaky. For example, money that the KfW development bank did not use for the gas price cap could be used for other purposes. Whether this would be watertight is still being examined. Lindner also needs to clarify whether subsidies to Deutsche Bahn and the Autobahn company can be replaced by loans. If the three ideas cannot be implemented, the SPD, Greens and FDP may have to renegotiate.

Scholz counters criticism from the Union: We did not cheat

The opposition Union considers this to be deeply dubious. “The government is trying to feign its ability to act with fake solutions,” criticized budget officer Christian Haase. This draft budget only serves to maintain the traffic light coalition’s power and is “a nasty mixture of fictitious accounting, tricks and questionable budgetary practices.”

Chancellor Olaf Scholz rejected the criticism. The government had not cheated, “everything was put together well,” said the SPD politician in the ARD “Interview of the Week.” “We have tried very hard to draw up this budget in line with the requirements formulated by the Federal Constitutional Court and which arise from the Basic Law,” stressed Scholz. Addressing the critics, he added that some were probably disappointed that the government had managed to draw up a budget.