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Bundestag Passes '24 Budget, But '25 Negotiations Loom Large


The German Bundestag has approved the 2024 budget following a difficult political process that was exacerbated by a ruling from the Constitutional Court in late-2023. The ruling regarding an off-budget Green Transition fund, blew a EUR60bn hole in the federal budget. The gov'ts efforts to plug the hole resulted in major tensions emerging between the three parties in the federal coalition, and sparked mass protests by farmers that have swept across Germany in the past few months.

  • Chancellor Olaf Scholz's Social Democrats (SPD), the environmentalist Greens, and the pro-business liberal Free Democrats (FDP) have seen intra-coalition relations deteriorate in the battle to find savings in the 2024 budget. These divisions are seen, among other factors, to have contributed to the decline in support for all three parties in recent months according to opinion polling.
  • Bloomberg highlightsthat while the 2024 budget may have (eventually) passed, there remain major difficulties for the coalition ahead of the 2025 budget. BBG: " even more daunting battle looms for next year’s budget. The problem facing the three-party alliance is a gap of roughly €20 billion ($21.7 billion) for the 2025 finance plan...lawmakers in Berlin are now at a loss to envisage how the coalition will proceed with the 2025 finance plan.... Given tax increases are a red line for Lindner’s FDP, cuts in spending and subsidies are the only options."
  • The next federal election is not due until autumn 2025 at the latest. However, June's European Parliament election and three state elections in September could put even more pressure on gov't unity.

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