Coalition agrees on budget and growth package
Published: Friday, Jul 5th 2024, 06:30
Updated At: Friday, Jul 5th 2024, 08:20
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After lengthy negotiations, the leaders of the traffic light coalition have achieved a breakthrough on the 2025 federal budget and a growth package. This was revealed to Deutsche Presse-Agentur by coalition circles following consultations between Chancellor Olaf Scholz (SPD), Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens).
The agreement on the 2025 federal budget and the financial plan up to 2028 stipulates that the debt brake will be adhered to, according to government sources. Accordingly, an emergency situation is not to be established.
The growth package could lead to additional growth of more than half a percent next year, or 26 billion euros in additional economic output, dpa learned from coalition circles. Accelerated depreciation of investments and an improved research allowance are planned. In addition, there are to be incentives for more employment.
Scholz, Habeck and Lindner met in the afternoon. The parliamentary groups of the SPD and the Greens met at 7.00 am.
Scholz awake
At 7.03 a.m., Scholz entered his parliamentary group in the Reichstag building with a smile. "Everyone awake?" was the only thing Scholz said at first after the marathon negotiations in the Chancellery.
Coalition leaders under budget stress
Scholz, Habeck and Lindner have negotiated frequently in recent weeks. They actually wanted to reach an agreement by this Wednesday. Now July 17 is being discussed for the cabinet decision. In order to reach this date, an early agreement in principle was necessary because the drafting of the budget law usually takes around ten days. From mid-September, the Bundestag will then deal with the draft budget, which could then be passed in November or December.
Billion-euro gap
Individual departments such as the Foreign Office or the Development Ministry were initially unwilling to accept Lindner's savings targets due to international obligations. The social budget was also controversial. In addition, there was still a gap of around 10 billion euros that needed to be closed. The SPD, in particular, pushed for the debt brake to be suspended again in order to have more leeway for investments, in view of the financial burdens caused by the war in Ukraine. This was out of the question for Lindner's FDP. The SPD rejected cuts to the social budget.
Growth package
Only minimal growth is expected in Germany this year. Companies are holding back on investments and private consumption is also not picking up. Business associations have long complained about the disadvantages of the location, such as a high tax burden, a shortage of skilled workers and too much bureaucracy. This is where the government wants to start with the "growth turbo".
Incentives for more employment
To incentivize more employment, employer contributions to pension and unemployment insurance are to be paid out directly as wages to employees who are already drawing a pension.
"Start-up funding" is to be introduced in the citizen's allowance. When the long-term unemployed leave the Citizen's Income scheme with a job, they are to keep significantly more of their earnings in the first year, without this being deducted from their housing benefit, for example.
In addition, tax allowances are to be increased and the income tax rate adjusted to inflation, according to government sources. Tax exemption for overtime is also to be introduced.
Less bureaucracy
The Ampel also wants to reduce bureaucracy. Mandatory practical checks are to be introduced in all ministries. It also stated that data protection should be "streamlined" in order to reduce the burden on small companies in particular. The EU Supply Chain Directive should be transposed into national law quickly. Special depreciation allowances are to be introduced for commercially used e-cars.
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