Germany's Coalition Reaches Agreement on 2025 Budget After Disputes

19 Aug, 2024

Germany's Coalition Reaches Agreement on 2025 Budget After Disputes

Germany's governing coalition has finally reached an agreement on the 2025 budget, following weeks of intense negotiations. The initial deal, clinched by Chancellor Olaf Scholz and top officials, had been stalled by new disputes, further straining the already unpopular government's image. Since December 2021, Scholz has led a three-party coalition comprising his center-left Social Democrats, the Greens, and the pro-business Free Democrats. This alliance, known for frequent infighting, has faced multiple challenges in maintaining unity on policy matters.

Financial issues have been a major sticking point, with Finance Minister Christian Lindner and his Free Democrats insisting on strict adherence to Germany's debt rules and opposing tax increases. The coalition has struggled to balance these demands with the need for exemptions from the "debt brake" rule.

In November, Germany's highest court nullified a government plan to repurpose €60 billion initially intended for pandemic relief, forcing a hurried revision of the 2024 budget. The coalition's recent negotiations focused on closing a €17 billion financing gap, which has now been reduced to €12 billion through restructuring, particularly in funding for the national railway. The revised budget will now be submitted to lawmakers for consideration.