German Parliament Approves 2025 Budget
The German Bundestag has given the green light to the 2025 federal budget, marking a significant step towards securing economic growth, job security, and the creation of future jobs. Chancellor Friedrich Merz (CDU) described the task of explaining spending cuts to citizens as "difficult", acknowledging the challenges that lie ahead.
The budget, which applies for a few months, provides planning security until the end of the year. Over the next twelve years, funds totalling 502.5 billion euros will be allocated for additional investments in infrastructure, energy, digitization, hospitals, research, sports facilities, construction projects, and education.
The largest expenditure item is the budget for work and social affairs, with over 190 billion euros allocated. Defence spending will also see a significant increase due to the tense international political situation, with the Bundeswehr set to receive over 62 billion euros in 2025.
Transport remains the largest investment budget, with around 23.7 billion euros earmarked in the core budget for investments, in addition to 11.7 billion euros from the special fund for infrastructure. A portion of the funds, 100 billion euros, will go into the Climate and Transformation Fund for climate protection projects.
However, discussions about tax increases and social reforms have already begun, with the aim of addressing the financing gap of over 30 billion euros that is expected to occur in 2027. This gap, which no coalition has ever had to close to such an extent, has raised concerns among political parties.
The Green and Left Party have accused the federal government of fudging figures and offering too little future perspective with the investments planned. On the other hand, the AfD have proposed cutting climate projects, EU contributions, and arms deliveries to Ukraine to reduce debt accumulation.
The new federal government plans a net credit intake of almost 82 billion euros in the core budget, with additional billion-dollar loans from special funds for the Bundeswehr and infrastructure. As the negotiations for the 2026 budget begin in the coming weeks, the focus remains on passing the budget before Christmas. The new borrowing for the 2025 budget is expected to reach around 143 billion euros, a level only reached during the corona crisis.
As the German government embarks on this ambitious spending plan, the challenge lies in striking a balance between economic growth, job security, and fiscal responsibility. The coming months will be crucial in determining the success of these efforts.
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