It looks increasingly likely Germany may enter 2025 without an agreed upon budget for the year.
But a safeguard built into Germany’s Basic Law, ensures that even when an official federal budget isn’t approved expenditure doesn’t immediately cease.
This allows authorities to continue to fulfil basic obligations, continue to meet legal obligations and fund previously-agreed projects. In short, it allows the Bundesrepblik to avoid an abrupt government shutdown.
What would be funded under the provisional budget?
With Chancellor Olaf Scholz of the Social Democrats (SPD) set to carry out a vote of confidence on December 16th which he expects to lose and the dissolving of parliament scheduled on December 27th to pave the way for new elections, time is running out to reach agreements.
Barring some kind of last-minute budget negotiation miracle, a provisional budget can be expected to be enacted from January 1st of 2025 until a federal budget agreement can be reached by the next government.
Put simply, this budget allows the government - which will be in caretaker mode until the new parliament is decided - to continue funding existing institutions and construction projects and financial aid etc., that had already been approved under the previous budget.
According to a report in the Rheinische Post, budgeters had said this also applies to military aid to Ukraine, which was to amount to €4 billion according to the previous budget draft.
Government staff salaries would also continue to be paid, and ongoing pre-approved infrastructure projects, like national railway construction projects, would continue to be funded in the interim period.
Other basic government functions, like the processing of visa applications or the payment of existing social benefits, would also continue.
What would not be funded?
Provisional budget management does come with certain restrictions.
The government cannot take on new debt or launch new spending programmes during this time.
Basically, anything that wasn’t already included in the previous budget couldn’t be introduced until the next government approves a federal budget for 2025.
So while the payment of existing benefits like Kindergeld will continue, a reform to the child benefit, which was intended to bundle support programmes and make it easier to access, would not be funded by the interim budget. Following the collapse of the traffic light coalition, it looks like this proposed reform might be lost completely, along with other proposed laws that hadn’t yet been formally approved.
How long until Germany will have a 2025 budget?
The 2025 federal budget will be the responsibility of Germany’s next federal government, which is to be determined following the coming snap election in February.
Drafting a budget for the year will certainly be among the new coalition’s primary concerns, but budget negotiations are rarely a quick and easy process.
According to a report by Spiegel, the fastest coalition to pass a new budget did so in 191 days and the slowest took 309 days.
On average the process has taken 264 days, which would mean that Germany might expect an official 2025 budget to take effect in November.
However key budget items could be funded before then. When a draft budget is available, the Minister of Finance can pre-emptively authorise funding, up to certain limits.
Interestingly, Germany also entered 2024 on provisional budget management, although for different reasons. At that time, the previous 'traffic light' coalition government was reeling after a court ruling in November 2023 left a €17 billion black hole in the finances.
READ ALSO: EXPLAINED - Why Germany may finally reform its debt brake
Comments