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Germany holds firm on austerity measures as it finalises budget for 2024

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Germany holds firm on austerity measures as it finalises budget for 2024
Euro notes and coins on a table. Photo: picture alliance/dpa | Monika Skolimowska

Germany's traffic-light coalition has finalised its budget for 2024, holding firm on controversial plans to slash farming subsidies and introduce tough sanctions for welfare recipients.

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After weeks of political wrangling, the three parties of the so-called traffic-light coalition - the Social Democrats, Greens and Free Democrats (FDP) - have agreed on the budget for 2024.

The decision that was originally meant to be concluded months ago has been pushed back several weeks amid ongoing crises and arguments over austerity measures, but on Thursday evening, the Bundestag's Budget Committee gave this year's budget its seal of approval.

With the debt brake - a constitutional cap on borrowing - coming back into force this year, the budget sketches out around €476.8 billion of spending and new loans totalling around €39 billion. 

The debt brake had previously been suspending over several years due a succession of crises, but was reinstated this year at the insistence of the centre-right FDP.

Despite the ongoing spending required to rebuild infrastructure in the Ahr Valley, the west German region hit by catastrophic floods in 2021, the debt brake will be reintroduced in 2024 without exceptions. 

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With severe restrictions on borrowing following a bombshell court ruling last year, the coalition had been forced to rethink their spending plans for 2024 and find billions of euros in savings.

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Welfare and subsidy cuts 

Faced with a €17 billion budget black hole for this year, the coalition has set its sights on numerous subsidy cuts - including for the agricultural industry - as well as increased taxes and tougher rules for welfare recipients.

Instead of hiking the CO2 tax to €40 per tonne of carbon emissions, this tax has been increased from €30 to €45 this year, meaning higher costs for end consumers - particularly on products like fuel and energy. 

In addition, the government pledged that it would stick to its word and abolish tax breaks on agricultural diesel - an issue that has sparked a furious backlash and weeks of protests by the farming community. 

Farmers from Hesse on Mainzer Straße in Weißbaden with their tractors on Monday.

Farmers from Hesse on Mainzer Straße in Weißbaden with their tractors on Monday. Photo: picture alliance/dpa | Arne Dedert

Ahead of Thursday's meeting, Farmers' Union president Joachim Rukwied threatened new far-reaching protests from next week if the planned subsidy cuts went ahead. 

READ ALSO: German farmers threaten new protests next week

Another area where savings wil be made is in the area of long-term unemployment benefits. Despite the hike in the monthly allowance for Bürgergeld recipients that came in at the start of the year, the government plans to slash spending in 2024 by tightening up sanctions for welfare claimants.

Under the government's plans, jobseekers who don't look hard enough for work could see their monthly allowance scrapped for up to two months, though housing allowances would continue. 

According to media reports, this tough rule will remain in place for at least two years, but could be reversed at the end of this period. 

'A balanced budget'

The Bundestag and Bundesrat are due to make a final decision on the 2024 budget at the beginning of February, but Thursday's decision from the Budget Committee is considered an important step in enshrining the spending plans in law. 

Speaking after the meeting, ministers told DPA that the latest budget was a result of compromise. 

"As coalition parliamentary groups, we are putting together a balanced budget despite different perspectives, against the backdrop of multiple crises and despite a difficult starting point for these parliamentary deliberations following the Federal Constitutional Court judgement," said budget ministers Dennis Rohde (SPD), Sven-Christian Kindler (Greens) and Otto Fricke (FDP) after the meeting.

READ ALSO: Flights to shampoo - How life will get more expensive in Germany in 2024

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Social justice, economic incentives, investment in climate protection, strengthening democracy and international cohesion would all be prioritised this year, the politicians said. However, tough subsidy cuts will remain in place. 

Speaking to DPA on Thursday evening, chief budget officer Christian Haase slammed the current budget and said the government was doing little to stimulate the economy. 

"The issues of internal and external security, which are important to us, have not been addressed very much," he added. However, the CDU welcomed that fact that the debt brake had been reinstated without exceptions. 

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