German parliament (Bundestag) endorses budget for the year 2025
The German government has unveiled its 2025 budget, with a total expenditure of approximately 502.5 billion euros. Here are some of the key points and controversies surrounding the budget.
The new debt for the 2025 budget is projected to rise to around 143 billion euros, marking a significant increase from previous years. This increase in debt is due to the government's decision to include new borrowing options and utilise special funds for investments.
One of the largest recipients of these funds is the transport ministry, which will see its budget decrease by 6 billion euros to 38.3 billion euros. However, the core budget for investments in 2025 remains at 23.7 billion euros. Multi-billion-euro loans from these special funds are planned for the Bundeswehr and infrastructure.
The defense budget for 2025 increases to around 62 billion euros, with an additional 24 billion euros from the special fund for the Bundeswehr. The Climate and Transformation Fund receives 100 billion euros from the 500 billion euros in debt-financed funds.
More than a third of the federal budget, around 190 billion euros, is allocated for work and social affairs. More than a third of this amount, around 122.5 billion euros, goes to the pension insurance.
An additional 11.7 billion euros from the special fund for infrastructure is available for railways, roads, or bridges in 2025. The Bundestag has approved a special fund with a total of 500 billion euros, to be used for investments over a period of twelve years.
The coalition plans large borrowing through special loans ("Sonderkredite") authorized by constitutional amendments to cover the financing deficits from 2027 onwards. This borrowing is expected to result in annual new debt rising up to 185 billion euros in the following years after 2024, primarily to finance defense and investments despite a strict consolidation course elsewhere.
Federal Chancellor Friedrich Merz has spoken of a 'difficult task' in explaining austerity measures to the citizens. The finance minister, Lars Klingbeil, defends the budget against criticism, stating that the government's top priority is to bring economic growth back to Germany, secure jobs, and create future jobs.
The opposition party, AfD, has proposed cutting climate projects, EU contributions, and arms deliveries to Ukraine to incur fewer debts. However, these proposals have not been supported by the coalition.
Debates over tax increases and social reforms have already begun, with a financing gap of more than 30 billion euros expected as early as 2027. The 2025 federal budget, however, only applies for a few months due to the collapse of the traffic light coalition and the early election.
In conclusion, the 2025 German budget presents a complex picture of increased debt, significant investments in defense and infrastructure, and ongoing debates over taxation and social reforms. The budget's implementation remains uncertain due to the political instability in the country.
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