Budget debate: The unfinished traffic light budget with “hopeful items”

The traffic light government has shown itself to be helpless when it comes to the budget. There is still a gap. What can the Bundestag still save?

It is the last complete budget of the traffic light government before the federal election – and it is probably more controversial than any before. The opposition, the Court of Auditors, the Bundesbank and economists all consider the figures of Finance Minister Christian Lindner to be more or less dubious or unrealistic. Is the traffic light government just trying to save itself until the end of the legislative period, as the Union accuses it of? During the budget week in the Bundestag, Lindner and the experts of the governing coalition must defend themselves.

Drawing up the budget for the coming year was certainly not a no-brainer, admits FDP leader Lindner right at the start. Three different schools of thought in the coalition of SPD, Greens and FDP, global crises and a faltering German economy – previous governments have actually had an easier time with the budget. “We have seen economic and legal, but also our respective political limits,” says Lindner. The general tenor in the traffic light coalition is that they have done what is possible and necessary under the circumstances. Satisfaction sounds different.

The key figures

The traffic light government plans to spend almost 490 billion euros next year, more than a tenth – 51.3 billion to be precise – of which on credit. According to the Basic Law, this is possible despite the debt brake, partly because the economy is faltering. The Finance Ministry has allocated 81 billion euros as investments – a record level. By far the largest item among the ministries is the social budget at 179 billion euros. A large part of this is already tied up in legally guaranteed benefits such as the citizen’s allowance.

The contents

With its budget, the traffic light coalition is trying to stimulate the economy, maintain social benefits, ease the burden on taxpayers and do justice to the tense international security situation. However, there is particular criticism of the budget for Defense Minister Boris Pistorius (SPD). Although he is to receive 1.3 billion euros more than last time, this is significantly less than demanded.

For families, the budget includes a five euro increase in child benefit from January. Tax allowances will also be increased. Lindner speaks of comprehensive relief and improved benefits for citizens. The state is foregoing revenue in order to strengthen purchasing power and facilitate private investment. For companies, for example, improved depreciation arrangements and relief on electricity prices are planned.

The helplessness of the traffic light

Ultimately, however, the traffic light leaders presented an unfinished budget. The calculation only worked because Chancellor Olaf Scholz (SPD), Vice Chancellor Robert Habeck (Greens) and Lindner showed enormous courage to leave gaps.

Until the end, the three were unable to agree on how to fill the funding gaps – so blanket savings and additional revenues are now planned, but no one knows how they will be covered. The debt brake is also being adhered to because the railway is receiving an equity injection instead of subsidies, which does not count when calculating debt.

The risky “post of hope”

In addition, the traffic light coalition is planning a very high global underspending of 12 billion euros. It is betting that the ministries together (hence “global”) will still have this amount left at the end of the year because projects fail or subsidies are not claimed. The amount is “well above past experience,” writes constitutional lawyer Hanno Kube in a report for the Union. According to the Ministry of Finance, it is the largest funding gap in a government bill in the past twenty years.

The government hopes to be able to reduce this gap by winter – perhaps through increasing tax revenues and better prospects for the economy. But that is extremely uncertain. Just like the assumption that more people receiving the citizen’s allowance will work in the future and therefore less money will be due for social benefits. And the assumption that the planned growth package for the economy will lead to around 6.9 billion euros more in tax revenue. The most important measures have not even been decided yet.

Union parliamentary group vice-chair Mathias Middelberg therefore calls the traffic light plans irresponsible, extremely unrealistic and dishonest. “No budget draft has ever contained such extensive uncovered items,” he said in the Bundestag. The government will run out of money in the course of 2025 – but the traffic light coalition is obviously only planning up to the election date on September 28th anyway.

The AfD budget expert Peter Boehringer also accuses the federal government of tricks and fictitious accounting. Additional global underspending totaling 27 billion euros is included in individual budgets. “That is dubious,” he said.

The dissatisfaction of the coalition partners

The Taxpayers’ Association believes that parliamentarians would have to completely rewrite the draft budget. That is unlikely, but not everyone in the coalition is happy either. Green budget officer Sven-Christian Kindler does not want to accept that cuts are being made to humanitarian aid and development cooperation despite global crises. In general, the Greens would like to loosen the debt brake to encourage more investment. They have the SPD on their side – but that is not enough.

Improvements are also conceivable in the aid to Ukraine. The German government is banking on an international support plan being ready in time: the country attacked by Russia is to receive a loan of 50 billion dollars, the interest and repayment of which will be covered by the proceeds of frozen Russian state assets. “If that doesn’t work in the end, then we’re back on the ball,” stressed SPD budget officer Dennis Rohde. The Social Democrats then want to declare an emergency situation and suspend the debt brake.

The schedule

After the budget week, it is the turn of the Bundestag factions. They examine where changes are sensible and possible. And they are also the ones who have to reduce the enormous funding gap. The MPs have already announced that they expect proposals from Lindner. They still have to save two to three billion or find additional income.

All changes will then be finalized in the budget committee’s reconciliation meeting scheduled for November – the legendary showdown that usually goes on until the early hours of the morning. As things stand, the Bundestag is due to approve the budget at the end of November. It won’t be easy until then. But that’s part of it, says the finance minister: “Disputes are part of democracy.”