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2025 Budget Likely Not Feasible According To External Report Cited By HB

GERMANY
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An external assessment commissioned by the German traffic light coalition reached the conclusion that some planned accounting measures on the 2025 budget will not be feasible in terms of applicability to debt brake calculations, multiple media outlets report (Handelsblatt article here).

  • Finance minister Lindner mentioned at the press conference announcing internal alignment on the 2025 budget that such an outcome might be possible and the coalition remains prepared to for further adjustments ('2024-2025 Budget Details Appear Optimistic For Debt Issuance' - MNI, July 17).
  • As such, it appears probable that the coalition will find a way to close the resulting additional funding gap of broadly E6bln - however, this will likely bring some further public turmoil with it, and will further reduce fiscal headroom.
  • It further appears that the assessment should not have an impact on German net issuance plans (standing at E43.8bln for 2025) as net issuance is capped by debt brake restrictions - rather, the coalition will have to cut spending or increase revenue to meet these restrictions, which it plans to fully exhaust in 2025.
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An external assessment commissioned by the German traffic light coalition reached the conclusion that some planned accounting measures on the 2025 budget will not be feasible in terms of applicability to debt brake calculations, multiple media outlets report (Handelsblatt article here).

  • Finance minister Lindner mentioned at the press conference announcing internal alignment on the 2025 budget that such an outcome might be possible and the coalition remains prepared to for further adjustments ('2024-2025 Budget Details Appear Optimistic For Debt Issuance' - MNI, July 17).
  • As such, it appears probable that the coalition will find a way to close the resulting additional funding gap of broadly E6bln - however, this will likely bring some further public turmoil with it, and will further reduce fiscal headroom.
  • It further appears that the assessment should not have an impact on German net issuance plans (standing at E43.8bln for 2025) as net issuance is capped by debt brake restrictions - rather, the coalition will have to cut spending or increase revenue to meet these restrictions, which it plans to fully exhaust in 2025.