To date, Germany has coped far better than many had originally expected with the economic and social consequences of the pandemic, said Federal Finance Minister Olaf Scholz at the start of budget week. The federal government has spent a lot on extensive assistance and will continue to do so. "We have taken this path and will continue along it," announced Olaf Scholz. Germany’s crisis management has been praised by many.
To get through the crisis satisfactorily, Germany will have to take on significant new debt next year and borrow almost 180 billion euros. Olaf Scholz admitted that it is not easy for him to accept this high level of new borrowing, but it is necessary, and thanks to the country’s sound financial policy in recent years it is feasible. Now it is important to invest in the future viability of the country, so that Germany’s economy can swiftly regain momentum. "This way, we can grow our way out of the crisis," declared Scholz confidently.
The 2021 budget has a total volume of 498.6 billion euros – about 10 billion euros less than this year, but still over 85 billion euros more than estimated in September. In the course of the COVID-19 pandemic, the German government has extended and expanded economic assistance packages to mitigate the consequences for businesses, employees and the self-employed. The federal budget has been expanded to provide for the requisite additional funding.
Overall it is clear that the federal budget for the coming year and indeed up to 2024 will be dominated by the massive impacts of the pandemic. The 2021 budget and the planning for the period up to 2024 is laid out below:
The German government has responded rigorously to the COVID-19 crisis and adopted an economy recovery and future package worth billions of euros. This is to help mitigate the immediate consequences, underpin prosperity and employment, and bring about sustainable economic growth. Next year and in the years to come, these measures, most of which are already having an impact, will be continued and financed.
The German government is countering the consequences of COVID-19 with a broad, forward-looking investment package. Investment is well above the pre-crisis level, at 61.9 billion euros in 2021, and some 48 billion euros a year for the period up to 2024. Social insurance contributions are to remain stable although social welfare spending has risen sharply in the course of the pandemic.
The planned investment aims to lay the foundations for robust, sustainable economic growth to enable Germany to emerge swiftly and strongly from the crisis. That is why next year and the coming years will see a lot of investment channelled into infrastructure, especially roads, rail and waterways.
The federal government is also supporting the federal states in the field of childcare, and developing education and research. The digital infrastructure, and the climate-friendly restructuring of the economy are other crucially important areas.
The financial planning of the German government reflects important projects for the future: developing artificial intelligence and digitalisation in the economy and the education system, with the promotion of quantum technology and forward-looking 5G and thereafter 6G communication technology.
In fiscal 2021, Germany will again need to take on new debt to balance revenue and spending in the federal budget. To this end, the German government will borrow 179.8 billion euros, which is significantly in excess of the cap on borrowing set out in the German Basic Law or constitution. That is only permissible because the German Bundestag has voted by a majority to confirm that the country is facing an exceptional emergency. The German government aims to comply in full with the ceiling on borrowing once again as of 2022.
How does the budget work from the government draft until the act of parliament comes into effect? Here is a brief round-up to explain procedures.