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Germany’s coalition leaders reached a new agreement on the 2025 state budget on Friday (August 16), reaching a compromise solution to the remaining sticking points that emerged last month.
Initial draft budget of €481 billion Passed in early July The condition is the entrustment Legal assessment of the compatibility of three specific measures In line with the German constitution.
The terms, aimed at reducing a 17 billion euro budget shortfall, include government plans to provide loans, rather than grants, to rail operator Deutsche Bahn and motorway operator Autobahn, and to tap unused funds from government development bank KfW.
Among the three measures under review, the government has now agreed to convert its funding for Deutsche Bahn into a 3 billion euro loan. In addition, the government will also inject 4.5 billion euros of additional equity into the company, government spokesman Steffen Hebestreit said in a statement on Friday.
The spokesman said both moves were considered “financial transactions” and would not count against Germany’s constitutional “debt brake,” which limits the structural deficit to 0.35% of Germany’s annual GDP.
“The debt brake provisions in the German constitution will continue to be observed and there will be no circumvention,” Herberstreit said.
Two other measures – assessed by law professor Johannes Hellermann and the Ministry of Finance’s scientific advisory board respectively – will not be implemented because they would increase the risk of legal remedies.
Instead, the remaining €12 billion shortfall will be considered part of the “global budget cuts” – the amount by which governments commit to spending less than they have officially budgeted.
“Years of budget experience have shown that not everything can be realized within a fiscal year,” Hebestreit said. Therefore, leaving such a gap is “a common practice in budget planning” – albeit usually at a low level.
The draft budget will now be sent to the German parliament for debate, with the goal of formally passing it before November.
(Editing by Anna Brunetti/Rajnish Singh)
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