Negotiations for the 2025 budget have begun without the usual benchmarks, but with upper limits for the ministries. Faced with a double-digit billion hole, the finance minister called for savings.
The fight for every cent begins again. The Ministry of Finance is now encouraging the cabinet to pursue austerity measures. Once again, after the 2024 budget has just been passed after lengthy night sessions and negotiations.
This time, the new State Secretary Wolf Reuter is negotiating the budget with the ministries after the long-time State Secretary Werner Gatzer was released into early retirement.
In a letter to the ARD capital studio Finance Minister Christian Lindner (FDP) explains to his cabinet colleagues that it will now “require a joint effort by the federal government to resolve the need for action in the federal budget.” That means: Everyone now has to submit savings proposals and see how they can cope with their budget – knowing that even more money will be spent on defense in the coming years and that there is a hole in the budget. There isn’t much leeway anymore.
New Budgetary procedures
The way the budget negotiations will be conducted will also be fundamentally different from previous years, as is now clear. “For the preparation of the federal budget for 2025, a benchmark procedure as in previous years is not effective, as there are no additional financial resources available for distribution,” writes the Finance Minister.
In concrete terms, this means that budget parameters should not be negotiated first – as is usual – but instead the houses should be given upper spending limits straight away. The ministries have already been aware of these with the 2024 financial plan and the negotiations between the Chancellor, the Vice Chancellor and the Finance Minister since December. This is intended to prevent the respective ministers from declaring high desired amounts for budgets.
“If the registrations do not correspond to the department-specific upper limits, they cannot be accepted. Further needs for action will have to be resolved together in the further process,” Lindner further makes it clear.
This time, the Ministry of Finance wants to avoid having to negotiate down high desired amounts again in many meetings. During the last budget debate, the Chancellor had to intervene several times. But it is unclear whether this will happen again this year and whether additional requests will still be registered by the ministries. The ministries’ plans should be available by April 19th.
Negotiations start with a budget gap
The new State Secretary Reuter starts the negotiations with a hole in the budget. The gap in the 2025 budget is estimated at between 15 and 30 billion euros. The Ministry of Finance speaks of a double-digit billion amount.
It is not to be expected that the economic situation will have any major relief effects on the federal budget. A weakening economy will probably also have an impact on tax revenues. The next tax estimate, which is also relevant for the budget, is due in May.
Where else can you save?
In the run-up to the budget negotiations, the respective ministers, but also the Chancellor, make it clear where savings cannot be made. The cabinet largely agrees that more money is needed for defense. The Chancellor and the responsible Labor Minister Hubertus Heil also see no potential for cuts in social spending.
Finance Minister Lindner sees it differently – at least when it comes to planned future social spending. With his statement that he would get by for three years with the money that was available and not spend any more money on new social projects and subsidies, he caused a lot of discussion in the traffic light coalition.
With this proposal he wanted to ensure that more money could ultimately be invested in defense. But this was not particularly well received by the other two coalition partners. The Greens and the SPD have repeatedly said that external security should not be played off against social security in Germany. Other means of financing would have to be found.
Debate about the debt brake enters a new round
This is likely to start a new political debate about lifting or reforming the debt brake this year – and the fronts are still hardened. The Finance Minister wants to stay within the framework of the debt brake when financing the 2025 budget and does not believe in special funds or special funds for certain projects. It is a liberal resolution that Lindner sticks to. He also doesn’t think much of tax increases; rather, he would like to further relieve the burden on the economy.
The Greens and the SPD, however, see more leeway. Especially given the current situation in Ukraine, which requires more money for swearing in, calls are likely to become louder in the coming weeks to declare an emergency again soon and to suspend the debt brake again.