The Federal Government will have to make do with 17 billion euros less next year. The Climate and Transformation Fund also needs to be re-prioritised. Federal Chancellor Olaf Scholz, Federal Minister of Economic Affairs and Vice Chancellor Robert Habeck and Federal Finance Minister Christian Lindner have agreed on how this can be achieved.

Budget discussions of this kind usually lasted several months, but in this case, a decision had been reached within a few weeks, said Federal Chancellor Scholz at the Federal Chancellery on Wednesday afternoon. The consultations had been thorough, trusting and solution-oriented, said Scholz.

Government priorities remain in place

The Federal Chancellor stressed the most important message right at the start: “The government is sticking to its goals.”  This included driving forward the climate-neutral transformation of the country and further boosting social cohesion, said Scholz. “And we stand closely by Ukraine’s side in its defence against Russia,” the Federal Chancellor added.

But one thing was clear, he said: “We will have to manage with significantly reduced financial resources to achieve these goals.” The reason for this was the “very far-reaching” verdict issued by the Federal Constitutional Court in mid-November, Scholz said. He emphasised: “We don’t like having to make cuts and savings. But they are necessary if we’re to manage with the money available to us.”

Less expenditure from the Climate and Transformation Fund

With the aim of saving 17 billion euros next year, there are plans to abolish climate-damaging subsidies and reduce expenditure in individual departments. According to Scholz, the Climate and Transformation Fund remains the central instrument of the Federal Government for the climate-neutral transformation of the country. Expenditure from the fund would have to be reduced by 12 billion euros next year, he said, and by a total of around 45 billion euros by 2027; however, the fund still had a very high total volume of 160 billion euros.

[video]

“Complying with the debt rule”

Scholz specifically addressed the issue of the debt rule under the Basic Law. “In the 2024 budget we are complying with the debt rule under Article 115 of the Basic Law.” However, the Federal Government would examine an exception provided for within the debt rule for further payments to those hit by the flood disaster in the Ahr valley in 2021, said Scholz.

“After all, the people affected by the flooding in North Rhine-Westphalia and Rhineland-Palatinate should be able to rely on the promises made to them,” said the Federal Chancellor. The Basic Law expressly stipulates that credit ceilings can be raised to cope with natural disasters and extraordinary emergencies. This is what the Federal Government did in response to the flood disaster in the Ahr valley in 2021, when it set up a special fund totalling 16 billion euros.

Based on the verdict of the Federal Constitutional Court, this type of fund has to be decided anew each year. According to Scholz, next year’s figure is 2.7 billion euros, for which the Federal Government would like to agree on a so-called “excess resolution”.

Government prepared for more Ukraine aid

The Federal Chancellor emphasised the Federal Government’s support for Ukraine. “We’re supporting Ukraine from the regular budget as planned – and above all for as long as necessary.” This includes eight billion euros for arms deliveries, financial aid for the Ukrainian budget – either directly or through the European Union – and probably more than six billion euros to help Ukrainian refugees in Germany.

Should the situation be exacerbated as a result of Russia’s aggression against Ukraine, the Federal Government was prepared to respond, emphasised Scholz. Nobody knew today whether such a situation would materialise or not, he said, but if it did, the plan was to propose an “excess resolution” to the Bundestag with regard to the debt rule.  

Habeck emphasises the “balance” of the resolutions

In his statement at the Federal Chancellery, Federal Minister of Economic Affairs and Vice Chancellor Robert Habeck said the budget talks had resulted in “balance” being maintained. He said the resolutions “secure further investment in social security in times of uncertainty and provide impetus for economic stability and renewal. Above all, however, they also give Ukraine the promise at a difficult time that we will stand by our word. That is certainly a signal that Putin ought to take note of,” said Habeck.

Lindner emphasises financial stability

Federal Finance Minister Christian Lindner emphasised that fiscal consolidation would continue in 2024. In 2021 the German debt ratio would be 69 percent, he said with the forecast for next year at 64 percent. The annual deficit had been 3.6 percent in 2021 – next year it was expected to be 1.5 percent, said Lindner: “This means that we’re on the right course, even accounting for all special funds and ancillary budgets.”