Germany’s three ruling coalition parties reached an agreement on the 2025 budget on Friday after weeks of tough negotiations that brought Chancellor Olaf Scholz’s government to the brink of collapse.
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A source close to the coalition government said Scholz’s centre-left Social Democrats and their partners the Greens and the pro-business Free Democrats reached the agreement after final-stage negotiations that began on Thursday.
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The government has faced repeated conflict since coming to power in 2021, but analysts feared the budget crisis, which pits supporters of austerity against those calling for bigger spending, could be the final straw.
There were murmurs of relief among coalition lawmakers that the coalition government had weathered the crisis safely.
“If the government had collapsed now, I think it would have been completely irresponsible given the global situation,” said Anton Hofreiter, a Green Party lawmaker and chairman of the German parliament’s European affairs committee.
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He added that Germany has a “great responsibility” towards Europe.
Pressure has been building to reach a deal and avoid the collapse of the coalition after last month’s European elections saw the far-right Alternative for Germany (AfD) party win its highest ever share of the vote, dealing a blow to the ruling party.
The debate over the budget has centred on calls for savings of nearly 30 billion euros by Finance Minister Christian Lindner, a fiscal hawk from the Free Democrats (FDP), but the proposals have been rejected by the Greens and Social Democrats (SPD).
Particularly controversial was Lindner’s call for cuts in welfare spending.
Lindner thought the benefits were too expensive and didn’t provide enough incentive for people to return to work.
But the SPD was unhappy with his stance, as it had made improving welfare a central focus of its 2021 election campaign in order to regain support from low-income voters.
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Details of the deal, which was signed Friday, were not immediately released.
But the source said the bill also includes an agreement to enforce a “debt brake,” a self-imposed constitutional limit on annual borrowing.
The debt brake had been a key point in the talks, with Lindner keen to revive it after it had been suspended for several years due to the energy shock caused by the coronavirus pandemic and the Ukraine war.
Debate over the rules intensified after the country’s Supreme Court ruled in November that the coalition government had violated them.
The Constitutional Court in Karlsruhe ruled that the government had violated the rules by trying to transfer the money to a special fund outside the main budget.
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The court’s decision tightened spending constraints for the fiscal year 2025 budget and stoked calls to eliminate or relax the rules to prioritize investments in the military in the face of growing threats from Russia and decarbonization.
But Lindner ultimately won the debate over the debt brake.
German media also reported that the defence ministry had received a much smaller budget increase than it had requested, despite government plans to modernise the military in the wake of Russia’s invasion of Ukraine.
The budget agreement comes amid a gloomy economic climate, with high inflation and a manufacturing slowdown stalling German growth.
The budget for next fiscal year was initially due to be approved by Cabinet on Wednesday but it now looks more likely to go for full Cabinet approval on July 17 after details are worked out.
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This article has been generated from an automated news agency feed without any modifications to the text.
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