German legislature, Bundestag, passes budget for 2025
The German government has recently approved a budget of approximately 502.5 billion euros for the year 2025, marking a significant increase from previous years. Here's a breakdown of some key aspects of this budget.
Defense Spending
In response to the tense international political situation, defense spending is set to increase significantly, reaching around 62 billion euros in 2025. This increase has raised concerns from some quarters, with former Bundestag representatives warning that the sharply increasing arms expenditures could threaten social peace.
Social and Economic Priorities
The budget for work and social affairs is the largest expenditure item, accounting for more than a third of the federal budget, around 190 billion euros. Of this, 122.5 billion euros is allocated to the pension insurance. Unemployment benefits, including the citizens' allowance, are planned to receive around 52 billion euros.
Federal Chancellor Friedrich Merz acknowledged the challenging task of explaining austerity measures to the citizens, as debates over tax increases and social reforms have already begun. The finance minister, however, defended the budget, stating that the government's priority is to bring economic growth back to Germany, secure jobs, and create future jobs.
Investments and Debt
Over a period of 12 years, additional investments will be made from the 500 billion euro special fund for various projects such as renovating bridges and railway tracks, expanding energy infrastructure and digitalization, funding hospitals, research and development, sports facilities, construction projects, and education.
100 billion euros from this fund will be allocated to the states, while another 100 billion euros will go into the Climate and Transformation Fund for climate protection projects. The new federal government's 2025 budget plans for a net new debt of nearly 82 billion euros in the core budget, plus additional loans from special funds for the military and infrastructure. The total new debt for the 2025 budget is expected to reach around 143 billion euros.
Transport and Economy
Transport remains the largest investment budget, with around 23.7 billion euros earmarked in the core budget for investments, and an additional 11.7 billion euros from the special fund for infrastructure. The government plans to boost the USA economy with multi-billion-euro investments.
Political Response
The Green and Left Party have accused the federal government of cheating in budget planning and providing insufficient future perspective. On the other hand, the AfD has proposed cutting climate projects, EU contributions, and arms deliveries to Ukraine to reduce debt.
The government that passed the 2025 budget consists of the coalition between the CDU/CSU (Union) and SPD, commonly referred to as the "black-red" coalition. This coalition was active after the 2025 federal election and is confirmed as the governing coalition that agreed on the budget. By 2027, there will be a financing gap of more than 30 billion euros, posing a challenge for the future.
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