The traffic light had to quickly put together the budget for the current year – now the breathing space is over. Budget negotiations for next year begin. This could be the moment of truth for the coalition.
Budget negotiations in a coalition always mean: long nights, debates, arguments. So far, so normal. But when representatives from the SPD, Greens and FDP now get together, things are likely to get a step or two more serious. The budget negotiations later this year could well become the ultimate test for this government – their collapse is possible.
There is already talk that a double-digit billion sum is missing from next year’s budget. According to “Spiegel” it is 25 to 30 billion euros. “The 2025 budget will be an enormous effort within the framework of the constitutionally required debt brake,” said FDP budget politician Otto Fricke ntv.de. “The times when federal and state governments were able to fulfill almost all wishes at the same time with constantly increasing tax revenues are over.”
The CDU budget keeper Mathias Middelberg also assesses the situation as difficult: “The challenges for the upcoming budget will be even greater than for the 2024 budget,” he told ntv.de. “Further aggravations due to the sluggish economy and the associated tax losses are foreseeable.” Four points show the challenges of the traffic light.
Point one: The economy is not going well, there was a recession last year, and stagnation is expected this year, with at best mini-growth. This means that tax revenue will no longer increase. These are very high by historical standards, even at a record level, but so are the expenses. So the scope is small.
Point two: What makes matters worse is that the large petrol station at the traffic light is now closed. She originally wanted to finance many of her projects with reallocated Corona billions without counting them towards the debt brake. However, the Federal Constitutional Court banned this in November last year.
Point three: There is little or nothing to be done on the income side. Even the Federal Government’s Council of Experts now recommends easing the debt brake, but even the words of these “economic experts” are not heard by the FDP. When it comes to this topic, it remains rock solid. Since a two-thirds majority in the Bundestag would be needed to relax the debt rule, the Union would have to agree anyway. But she also wants to leave everything as it is. The FDP also strictly rejects tax increases.
Point four: The defense budget must continue to grow if Germany wants to achieve NATO’s two percent target in the future. So far this has only been possible thanks to the special fund for the Bundeswehr. But that should be issued in 2027. In the current year, a good 19 billion euros from the special fund will contribute to achieving the two percent target. So it’s about double-digit billions of dollars that should be reflected in the defense budget in three years at the latest. Chancellor Olaf Scholz and Finance Minister Christian Lindner have said several times that there should be no new special funds. Instead, the two percent target should be achieved through the defense budget.
That sounds like a thing of the future, but it isn’t. Because with every new household Financial planning for the next five years updated. Since the count begins with the current year, it will now extend until 2028. There was no massive increase in the defense budget in the previous financial planning until 2027. This should be the case by 2028 at the latest.
With on-board resources to combat the crises
Now the traffic light has to master the big challenges with on-board resources, so to speak, i.e. the transition to a more climate-friendly industry, digitalization, investments in infrastructure and strengthening the Bundeswehr.
The whole matter is not made any easier by the fact that the trust of the traffic light partners is at its lowest point. There is already discussion about whether the SPD, Greens and FDP will make it across the finish line, i.e. by the next federal election in autumn 2025. In the worst case, the budget for the coming year could become what the iceberg was to the Titanic . Except that no one believes that the traffic light would be unsinkable.
The fact that an agreement will be difficult again this year is evident from the fact that the government is also this year no benchmarks wants to decide, as the “Handelsblatt” reported. The aim is to outline the budgets of the individual ministries in advance before fine-tuning them later. This was also omitted last year – long before the Federal Constitutional Court’s ruling and the pressure to save money was not yet so great. For months, the FDP and the Greens argued about basic child welfare.
This time, Lindner wants to set upper limits for the departments instead of letting them formulate their own requirements first. This is unlikely to go down particularly well with the SPD and Green ministers. “We know about our own disagreements and are therefore pushing the numbers until the summer in the dubious hope of having resolved the dispute by then,” said CDU householder Mathias Middelberg ntv.de.
If you have to make do with the money you have but want to spend more on major projects, you have to save somewhere. The FDP would prefer to focus on social spending. At a good 38 percent, they make up the largest item in the budget. Lindner is already saying that there should be no new spending requests in this direction. Householder Fricke told ntv.de that it was also the job of politicians to “make sometimes unpleasant decisions.” Secretary General Bijan Djir-Sarai said in an interview with ntv.de that the problem was spending. He saw a need for action, for example, with citizens’ money. But starting there is the very last option for the SPD and the Greens.
That’s why there’s a lot of thought going on – there are considerations, for example, not to count spending on defense or climate protection towards the debt brake. Whether this is even possible constitutionally is another question.
Shaky statics of the traffic light
Apart from that, there is still a small back door. In their most recent budget agreement, the three traffic light partners agreed to possibly suspend the debt brake if Ukraine suddenly needed significantly more money. This could be the case if the USA stops its aid after Donald Trump wins the election. But Lindner made it clear that even then savings would still have to be made.
Now the shaky statics of the traffic light are visible again. The reallocated Corona billions were once used to create something of a cash cow. The government had billions of dollars at its disposal without these being counted towards the debt brake. Since Karlsruhe banned this, the entire structure has been shaking. Scholz, Lindner and Economics Minister Robert Habeck then managed to quickly redraft the budget for the current year – but the result was the farmers’ protests, which have still not subsided.
However, that was just a foretaste of the budget for 2025. At least if it is true that 20 to 25 billion euros are missing. Then it will not be enough to dismantle small subsidies such as diesel subsidies for farmers. Fundamental directional decisions must be made. Saving with a debt brake or investing with more leeway thanks to a relaxed debt brake? For this government, these are the alternatives as long as the debt brake remains untouchable for the FDP. Where do you set your priorities now? Getting to a common denominator here will be a Herculean task for the traffic lights.