German parliament passes 2025 budget
Germany's 2025 Federal Budget: Challenges Ahead
The German government has approved its 2025 federal budget, with the SPD and CDU/CSU parties forming a coalition after the early federal election on February 23, 2025. The SPD, led by Federal Finance Minister Lars Klingbeil, has announced extensive reforms and budget plans for the year, despite facing challenges in later years' budgets.
Federal Chancellor Friedrich Merz acknowledges the "difficult task" of communicating savings measures to citizens, as debates on tax increases and social reforms have already begun. The budget, which foresees expenditures of around 502.5 billion euros, aims to boost the economy, secure jobs, and create future jobs.
The largest expenditure item is the budget for work and social affairs, with around 190 billion euros allocated. Transport remains the largest investment budget, with around 23.7 billion euros earmarked for investments in the core budget. The Climate and Transformation Fund will receive 100 billion euros from the special fund for climate protection projects. A special fund of 500 billion euros has been approved for additional investments over a period of twelve years.
Defense spending will significantly increase due to the tense geopolitical situation. The Bundeswehr will receive significantly more money, with a defense budget of around 62 billion euros in 2025. Multi-billion-euro loans from special funds are planned for the Bundeswehr and infrastructure. However, former Bundestag member Sahra Wagenknecht warns that the sharply increasing arms expenditure threatens social peace.
The Green and Left Party accuse the federal government of trickery in budget planning, while the Green Party co-chair Sebastian Schäfer criticizes the investments planned by the Union and SPD, stating they offer too little future perspective. The AfD, on the other hand, demands fewer debts and proposes cutting climate projects, EU contributions, and arms deliveries to Ukraine.
Finance Minister Klingbeil defends the budget against criticism, stating that no coalition has ever had to close such a large hole. The new debt is likely to rise to around 143 billion euros. By 2027, there will be a financing gap of more than 30 billion euros. The budget plans a net credit intake of almost 82 billion euros in the core budget.
Negotiations for the 2026 budget will begin in the coming weeks. The government aims to boost the economy with multi-billion-euro investments, but the question remains whether these measures will be enough to address the challenges ahead.
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