• Germany's news in English

Where the axe has fallen: a budget cut breakdown

The Local · 8 Jun 2010, 13:09

Published: 08 Jun 2010 13:09 GMT+02:00

Facebook Twitter Google+ reddit

After an intensive, two-day cabinet session, the coalition government of Chancellor Angela Merkel’s centre-right coalition has decided to slash €80 billion from the budget by 2014, including €11.2 billion next year.

The axe will fall hardest on welfare, with savings adding up to more than €30 billion over four years.

Parental benefits

While the maximum monthly payment for new parents known as Elterngeld will remain at €1,800, there will be a modest cut to the rate for people on net incomes of more than €1,240 a month, from 67 percent to 65 percent. The targeted saving is €200 million a year.

The present €300 per month Elterngeld for recipients of unemployment benefits will be scrapped completely. That aims to save €400 million per year.


People shifting from regular unemployment insurance to long-term jobless benefits now get an extra payment of up to €160 a month for singles or €320 for married recipients for the first year and half these amounts for the second year. These bonuses will be abolished, saving €200 million a year.

The biggest saving will come from giving the Federal Employment Agency more discretion, allowing it to make decisions about unemployment support and re-integration programmes. This aims to make the management of the long-term unemployed more efficient. Savings are estimated at €4.3 billion in the first year, rising to €10.2 billion in 2014.

For recipients of long-term unemployment benefits, or Arbeitslosengeld II, the government will slash the rates of pension insurance, saving €1.8 billion a year.

The heating allowance for recipients of government accommodation benefits will also be slashed, saving €100 million a year.

Air travel tax

The “ecological air traffic tax” would be imposed on all passengers departing from German airports, and would be levied on criteria such as price, noise and consumption. It could be introduced by including air transport in agreed carbon emissions trading standards and would aim to raise €1 billion a year from 2013.

Armed forces

The structure of the German military will be scrutinised with the aim of saving €2 billion a year from 2013. A special commission set up by Defence Minister Karl-Theodor zu Guttenberg will look at how to cut military staff by 40,000 to about 210,000.

Nuclear energy tax

Energy firms will pay a new tax on profits derived from the extension to the lifespan of nuclear power plants, raising €2.3 billion a year between 2011 and 2014.

Deutsche Bahn

The German rail operator will pay a new dividend on its profits, which the government hopes will deliver €500 million a year.

Financial services tax

A tax on financial transactions would be introduced from 2012, involving an agreement with European and international partners, and would raise €2 billion a year. Merkel said the chances that neighbours would agree to a European-wide levy were "not bad."

Public sector

About 15,000 jobs will be cut from the public sector by 2014. The rest of the bureaucracy faces an effective 2.5 percent pay cut, with the abandonment of the planned raise in the Christmas bonus in 2011, saving €800 million a year. Overall, cuts to the public service will save €13.4 billion over the four years.

Story continues below…

Environmental tax

Exemptions from the environmental tax would be slashed, notably for energy-intensive industries. This would raise €1 billion next year.

Research and development

The government’s previously announced plan to boost spending on research and development by €12 billion by 2013 remains in place.

Berlin City Palace

The reconstruction of Berlin’s historic city palace will be put on hold at least until 2014, saving the federal government €440 million. The plan will be revived when the money is available.

Sources: Federal Government, Financial Times Deutschland

The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

14:20 June 8, 2010 by William Thirteen
i suppose its mostly apt - though eliminating the Elterngeld for recipients of unemployment benefits seems a bit severe...
14:39 June 8, 2010 by dcgi
Yeah, I guess they'll have to cut down on the number of fags they smoke from now on ;)
15:56 June 8, 2010 by Bushdiver
If the DB is going to have to pay new dividends on it's profits, who do you think is going to end up paying that?
18:03 June 8, 2010 by William Thirteen
and thankfully that hideous architectural abortion has been held off for another four years....
22:03 June 8, 2010 by slawek
"A tax on financial transactions would be introduced from 2012,..."

I'm wondering if this affects ebay in any way or any business based on online trade.
08:05 June 9, 2010 by DoubleDTown
210,000 in the German military? I had no idea it was so big. And they still aren't very expeditionary. What are over 200,000 doing?
13:55 June 9, 2010 by slawek
It's actually 38.000.000 that could be drafted at any time in case of war. I'm guessing half of that are already trained soldiers.

The german military is not prominent enough for media coverage, because they mostly provide espionage, observation, training, medical and specialist aid to its NATO partners. Nothing spectacular happening here, just sort of assistance.
20:55 June 9, 2010 by munchau
Lets tax Germans and better still that lend -( or give as per a monetary union loans become transfers) Euro 200 bn to the Euro solidarity fund to bail out Portugal, Ireland, Italy Greece and Spain and soon France. This is of course just the start, in three years when the loans come due and Greece cant pay, we will have to roll this loan and lend even more to over the interest payments ECB lending to Greek banks is $78 bn euros too and ECB owns Euro 25 bn of Greek bonds so if they default, we as the biggest shareholder in the ECB will have to put more money in. Excellent raise taxes to fund the losses elsewhere
21:20 June 10, 2010 by JohnnesKönig
So now Germans will pay for the Greek Austerity package by cutting the German Austerity package... And then to kick them while they are down, vote in a pay raise for these crooks!
Today's headlines
Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Parents who don't get nursery spot for kid entitled to pay
Photo: DPA

The Federal Court of Justice (BGH) ruled on Thursday that parents whose children don't receive placements in nursery care are entitled to compensation.

Eurowings braces as cabin crew union proclaims strike
Photo: DPA

A union representing cabin crew for Lufthansa's budget airline Eurowings announced that strikes could take place at any time over the next two weeks, starting on Monday.

Mysterious German U-boat wreckage found off Scotland
Photo: ScottishPower

First World War U-boat "attacked by sea monster” thought to be found off Scottish coast.

Supermarket Edeka warns of exploding apple juice bottles
Photo: DPA

"Risk of injury" from "Gut und Günstig" sparkling apple juice bottles has forced Germany's largest supermarket to recall the product.

By wheelchair from Syria to Germany: teen's story of hope
Nujeen Mustafa. Photo: HarperCollins-William Collins Publicity/Private

She tackled the gruelling 2,000-kilometre migrant trail in a wheelchair, translating along the way for other refugees using English she learned from a US soap opera. Now this teen is living in Germany and hoping to inspire others with a newly published memoir.

Berlin Zoo to have a pair of pandas by next summer
A recently born panda pair at Vienna Zoo. Photo: DPA

The giant bamboo-eating bears will move into a brand new 5,000 square-metre enclosure in the capital's Zoologischer Garten.

Two new spider species discovered in Munich
Zoropsis spinimana. Photo: rankingranqueen / Wikimedia Commons

It's news every arachnophobe in Munich is no doubt thrilled to hear: two types of spider new to the region have been discovered in the Bavarian capital - and one of them bites!

After woman's body found in barrel, husband may walk free
Franziska S., who went missing 24 years ago. Photo: Hanover police.

A woman disappeared in Hanover 24 years ago, but no one reported her missing. Although her husband has now confessed to her murder, he still may not step foot in jail.

Two injured after army tank falls 50 metres in Alps
A Bundeswehr Puma tank. File photo: DPA

A Bundeswehr (German army) soldier has been severely injured after the tank he was riding in crashed 50 metres down an embankment after going off course in bad weather.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd