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GERMANY
After the German parliament passed a 2023 supplementary budget last week, focus now shifts to the final 2024 budget. A broad estimate of the impact of the already announced measures suggests around a further E4.6bln of cuts will have to be found.
- The government announced last week that a total E17bln funding gap must be closed to stay within the debt-brake-implied budget limits in 2024. Broad impact estimates of the announced measures are as follows:
- E4bln: refinancing rail subsidies using privatization proceeds
- E1.4bln: refinancing the EU plastics levy which is currently paid by the national state
- E0.9bln: cutting agricultural subsidies focused on diesel
- E0.7bln: cutting other “climate-damaging subsidies”
- E1.5bln: better targeting of social benefits
- E1.3bln: cutting solar industry subsidies
- E1.3bln: letting electric car subsidies expire early
- E1.3bln: increasing the CO2 Price paid on fuel, gas, and heating oil to E45/t instead of E40/t
- This leaves E12.4bln of the required E17bln savings assigned to specific measures. The remaining E4.6bln are open as of now, with wires pointing towards a cut of heating renewal subsidies making up parts of the remaining gap.
- Cuts to meet the remaining E0.7bln savings in “climate-damaging subsidies” might potentially target kerosine taxation on domestic flights, wires report.
- Details on the 2024 budget are not to be expected this Wednesday (as thought earlier), according to Reuters citing a government spokesperson. The adoption of the final 2024 budget is currently expected for 2 February 2024, according to newspaper Die Zeit. This would make preliminary budget management necessary, under which the government can only approve administrative necessary expenditure and fulfill legal obligations. Potential impacts from this seem relatively limited, however, as preliminary budget management occurred in 8 of the last 20 years in Germany, according to a professor from the University of Administrative Sciences Speyer.
MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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