German Coalition Needs More Time to Agree on 2025 Finance Plan
(Bloomberg) -- Germany’s ruling coalition will miss a self-imposed deadline of next week to agree on its draft 2025 budget but is still aiming to approve it in cabinet before the end of July.
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Talks on next year’s finance plan are especially fraught after Finance Minister Christian Lindner imposed belt-tightening on all ministries except defense. They’ve also been complicated because the government is concurrently drawing up another package of measures designed to lift Germany’s sclerotic rate of economic growth, Lindner said Tuesday at an industry lobby congress in Berlin.
Chancellor Olaf Scholz’s cabinet won’t have the 2025 finance plan ready for sign-off by an original target date of July 3, according to people familiar with the planning. Instead, they’re looking to approve it two weeks later, said the people, who asked not to be identified discussing confidential information.
Asked by email about the budget timeline, spokespeople for the finance ministry did not immediately respond.
“The discussions on the 2025 budget are also intensive because they are directly and inextricably linked to our talks on measures to overcome the country’s weak growth,” Lindner said.
The latest package, which comes on top of a similar set of measures enacted earlier this year, will include investments in public infrastructure, he added.
He said other planned measures include:
An expansion of tax write-offs for companies
A further easing of the corporate tax burden
Stepping up efforts to eliminate red tape
Tax incentives for people to extend their working lives
The ruling parties — Scholz’s Social Democrats, the Greens and Lindner’s Free Democrats — are under pressure to show they can still function after voters gave them a battering in this month’s EU Parliament elections.
The fiscally hawkish Lindner is forcing renewed spending restraint on his cabinet colleagues after insisting on the restoration of a constitutional limit on net new borrowing — known as the debt brake — for this year’s finance plan.
The mechanism was suspended for four years through 2023 to help deal with the fallout from the Covid-19 pandemic and the energy crisis.
Once the 2025 budget has been endorsed in the cabinet, it will be sent to parliament. It would then be expected to win approval from lawmakers in both the lower house, or Bundestag, and the Bundesrat upper house, where the 16 regions are represented, by the end of the year.
--With assistance from Michael Nienaber.
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