German Supplementary Budget Plans Would Lead to Higher Issuance

The German government is planning to resolve its delayed 2025 budget negotiations with a 2024 supplementary budget, newswire Bild reports.

• Delays to the 2025 budget negotiations arose as some ministries requested higher spending allowances than estimated before. The traffic light coalition plans to agree on the budget by July 3.
• To resolve the misalignment, the coalition now plans to bring forward a 2024 supplementary budget, which is expected to contain spending which would otherwise have been put into the 2025 budget.
• A supplementary budget including higher issuance will become legal as the German economy is growing less than initially estimated. (Debt brake issuance limits include a cyclical adjustment component - so as growth is lower than initially thought, more net issuance is allowed).
• These cyclical adjustment components will broadly amount to around E11bln according to current estimates, Bild reports. That is close to the amount that 2024 tax revenue estimates were downwardly revised recently ('Further Downside Risks to Downwardly Revised Tax Estimates', May 17) after a shortfall in the first months of 2024, which MNI reported on ('Tax Revenue Tracking Around E10bln Lower than YTD Forecast', MNI, April 23).