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The three parties of Germany's coalition government have reached an agreement on the 2024 federal budget, following a constitutional court ruling that challenged their financial plans.
The Social Democrats (SPD), the Greens, and the Free Democrats (FDP) announced on Tuesday that they had agreed on a budget that respects the debt limit, boosts investment, and prioritizes social welfare, security, and climate action.
The budget provides for revenues and expenditures of 445.7 billion euros, just under 31 billion euros less than the current year's budget. The new debt will be reduced to 15.9 billion euros, compared to 99.7 billion euros in 2023.
The budget also includes a record-level of investment, amounting to more than 54 billion euros in 2024 alone, and rising to 57.2 billion euros by 2027. The investment will focus on areas such as digitalization, infrastructure, education, research, and innovation.
The coalition partners also agreed on a number of social measures, such as introducing a citizen's income, reforming the housing benefit, and pooling various family benefits in a basic child allowance. The budget also allocates more funds for security and defense, as well as for the transition to a climate-neutral economy.
The budget agreement comes after a constitutional court ruling in November that declared the suspension of the debt limit in 2020 and 2021 as unconstitutional. The court also questioned the validity of the emergency clause that allowed the government to exceed the debt limit in 2022 and 2023 due to the COVID-19 pandemic.
The ruling forced the coalition government, which took office in December, to revise its financial plans and to seek parliamentary approval for the 2024 budget before the end of the year.
Chancellor Olaf Scholz, who leads the SPD, said the budget agreement was a sign of the coalition's ability to act swiftly and constructively in the face of challenges.
"We have shown that we can work together and find solutions that are good for our country and for Europe," Scholz said at a press conference.
Finance Minister Christian Lindner, who heads the FDP, said the budget was a balanced compromise that respected the constitutional requirements and the coalition's vision.
"We have managed to combine fiscal responsibility with future-oriented investment, without raising taxes or cutting spending in other areas," Lindner said.
Economy Minister Robert Habeck, who co-leads the Greens, said the budget was a step towards a more sustainable and fair society.
"We have made sure that the budget supports the ecological and social transformation that we need, and that it does not leave anyone behind," Habeck said.
The budget agreement will be presented to the cabinet on Wednesday and then submitted to the parliament for approval. The coalition government hopes to pass the budget before the Christmas break.
