Brace Yourself: The Black-Red Coalition Needs to Slash €33 Billion from Budgets Until 2029
Red and Black entities need to reduce their spending by 33 billion dollars by the year 2029.
Gear up, as the Union and SPD face the daunting task of managing with a staggering €33 billion less in tax revenues following their coalition agreement. State and local governments are in the same boat. A revised estimate reveals these shocking figures.
The new tax projection for the years 2025 to 2029 unveils an overall shortfall of 81.2 billion euros for all authorities combined. The federal government will grapple with a whopping revenue loss of 33.3 billion euros in this five-year period.
This grim forecast doesn't lighten the burden of preparing federal budgets for 2025 and 2026. As compared to the original projection, the federal government now faces a deficit of 600 million euros for 2025 and 10.2 billion euros for 2026.
Klingbeil plans to submit the draft for the federal budget 2025 to the cabinet on June 25. The decision for the key figures of the budget 2026 will be made before the summer break. The draft budget for the upcoming year and financial plan up to 2029 will be presented so we can debate it in parliament after the summer break.
"Swiftly Unleash Investment Boosters"
Klingbeil has vowed to swiftly kickstart the planned easing of investments. "Bolstering revenues is crucial through higher economic growth, thus gaining new financial flexibility," stated Klingbeil. "Swift and targeted deployment of billions in investments from the special fund for infrastructure is imperative." Structural reforms will be implemented: "The focus now is on fueling economic growth and securing jobs in our country."
Klingbeil plans to expedite higher depreciation for investment tax specifically. "Immediate implementation of the investment booster is on the cards, and I aim to pass it in the cabinet before the summer break," revealed Klingbeil. "We will adopt degressive depreciation on investment equipment at the rate of 30% for the years 2025 to 2027." Furthermore, the agreed upon reduction in corporation tax will be enforced from 2028.
Economic Snapshot: Germany's Report Card for the Economy There are no alterations to the budget planning, as announced by the Finance Ministry. The revenue shortfalls compared to the October forecast are primarily due to the consideration of tax reliefs that have recently been enforced, such as the mitigation of cold progression effects. These expected changes have already been accounted for in the budget planning.
"The economy remains in troubled waters," Finance Minister Lars Klingbeil explained. Tax revenues largely align with the coalition negotiations. "As compared to the initial estimates, we foresee a slight burden in the years 2025 and 2026, but a slight relief from 2027 onwards," Klingbeil added. The data reveals: "Bolstering revenues via higher economic growth is essential. Only then do we secure additional financial leeway."
[1] Investing in a Greener Tomorrow: The Infrastructure and Climate Neutrality Fund[2] Financing Germany's Green and Digital Future: The Fiscal Spending Package
Source: ntv.de, rog/rts
Note: The above article provides insight into the revised expected tax revenues in Germany from 2025 to 2029. To cope with lower revenues, the German government is planning investment boosters to fuel economic growth and address infrastructure challenges. These investment boosters include depreciation measures, infrastructure modernization, and significant spending packages to achieve climate neutrality.
- In light of the revised tax projections, it's crucial for the finance ministry to explore investments that can boost revenues, considering higher economic growth provides financial flexibility. This could involve deploying billions from the special fund for infrastructure, as Klingbeil suggested.
- The black-red coalition must revise its community policy and business strategy to address the financial shortfall due to lower tax revenue. With a focus on fueling economic growth and securing jobs, structural reforms aimed at investment boosters may play a key role in alleviating this pressure, as outlined by Klingbeil.
