After days of negotiations, the leaders of the traffic light coalition have reached an agreement on the federal budget for 2024. According to Chancellor Olaf Scholz (SPD), the SPD, Greens and FDP want to stick to their central goals, but are forced to make cuts and savings following the Federal Constitutional Court’s budget ruling. “We don’t like doing them, of course, but they are necessary so that we can get there with the money we have available,” said Scholz on Wednesday in Berlin.
According to his presentation, climate-damaging subsidies will be abolished, expenditure by individual departments will be reduced and federal subsidies will be reduced. The traffic light is also examining an exception to the debt brake for further payments for the people affected by the flood disaster in the Ahr Valley in 2021. She will approach the Union as the largest opposition faction and seek their support for this step.
The Chancellor reiterated the three central goals of the traffic light coalition: “We are vigorously pushing forward the climate-neutral transformation of our country. We are strengthening social cohesion. And we are standing closely with Ukraine in its defense fight against Russia.” These three goals continued to guide the federal government. “But one thing is clear: we have to get by with significantly less money to achieve these goals.”
With the agreement that Scholz, Federal Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens) had fought for for days, there is a solution to the budget crisis almost four weeks after the Federal Constitutional Court’s ruling. The traffic light leaders had since discussed how a 17 billion euro hole in the budget for the coming year could be plugged. It was also about financing numerous investments in climate protection and the modernization of the economy.
According to the ruling from Karlsruhe, 60 billion euros are missing from the so-called climate and transformation fund, which had already been firmly planned for the next few years – around 13 billion euros in 2024 alone. The Karlsruhe judges had declared a reallocation in the 2021 budget null and void and decided that the federal government was not allowed to reserve emergency loans for later years.
Among other things, the traffic light now wants to increase the CO2 price for refueling and heating with fossil fuels. Habeck and Lindner said on Wednesday in joint statements with Scholz in the Chancellery that the old price path of the grand coalition would be returned. A planned billion-dollar subsidy for fees for the electricity network is to be canceled, as the German Press Agency learned from coalition circles. According to Lindner, the reduction of climate-damaging subsidies should amount to three billion euros.
The traffic light coalition also wants to cut climate protection and transformation projects worth 45 billion euros by 2027. The climate and transformation fund remains the federal government’s central instrument for the climate-neutral transformation of the country, said Scholz. It still has a total volume of 160 billion euros. In 2024 alone, spending would be reduced by 12 billion euros.
According to information from the German Press Agency, the traffic light also wants to introduce a kerosene tax on domestic flights within Germany and abolish tax breaks for agricultural and forestry companies, the so-called agricultural diesel.
Lindner emphasized that there would be “no reduction in social standards.” Nevertheless, through more accuracy in social benefits, savings of 1.5 billion euros can be achieved. The FDP chairman cited the labor market as an example. Refugees from Ukraine should be better placed. According to Habeck, the funding for the purchase of electric cars will also expire earlier than planned. The year 2025 was previously planned. There will also be cuts in the solar industry. “That hurts me,” said Habeck, referring to both measures.
At the same time, the coalition leaders assured Ukraine of further and comprehensive aid. This support will come from the regular budget, “just as we planned and, above all, for as long as necessary,” said Scholz. This included 8 billion euros for weapons, financial aid for the Ukrainian budget and probably more than 6 billion euros to support Ukrainian refugees here in Germany. “If the situation worsens as a result of Russia’s war against Ukraine, for example because the situation on the front deteriorates, because other supporters are reducing their aid to Ukraine or because the threat to Germany and Europe continues to increase, we will have to react to it,” said Scholz .
The traffic light government actually wanted to pass the 2024 budget before the end of the year, but it was already clear last week that this would no longer be possible due to consultation times in the Bundestag and Bundesrat. Now, at least the Bundestag’s Budget Committee could potentially complete its deliberations before Christmas. But that depends on the exact extent of the changes to the budget. In January, the Bundestag could meet for budget week and decide on the figures, after which the Federal Council could give the green light.
A so-called provisional budget management would apply for that long. Then, for the time being, only expenses that are necessary to maintain administration and fulfill legal obligations are possible. In practice, however, the Ministry of Finance can authorize ministries to use a percentage of the funds in the not yet approved draft budget each month.
