Germany's ruling coalition has given its approval to a budget plan that includes a significant reduction in net new borrowing for 2024. The plan, proposed by Finance Minister Christian Lindner, aims to bring the country back to fiscal normality after the suspension of the constitutional limit on new debt due to the pandemic and energy crisis. Lindner, known for his fiscal conservatism, believes that a prudent budget will help curb inflation and support the European Central Bank in achieving its goal of 2% annual increase in consumer prices.
According to government figures, the budget for 2024 will see a decrease in net new borrowing to €16.6 billion, compared to €45.6 billion in 2023. This trend will continue with further reductions to €16 billion in 2025 and €15 billion by 2027. However, defense spending is set to increase, with Defense Minister Boris Pistorius allocated €51.8 billion in the regular budget for 2024, an increase of €1.7 billion from this year.
Additionally, an extra €19.2 billion from a special fund established after Russia's invasion of Ukraine will contribute to a total military investment of €71 billion. This increase will help Germany meet the NATO target of spending at least 2% of its output annually on defense.
Overall spending for 2024 is projected to decline to €446 billion, down from €476 billion in 2023. However, it is expected to rise gradually through 2027.
The budget plan, titled "Back to fiscal normality," has received praise from industry representatives. Tanja Goenner, managing director of Germany's BDI industry lobby, welcomed the government's focus on fiscal consolidation while emphasizing the importance of prioritizing spending to strengthen the economy and support areas such as digital transformation, climate protection, and sustainable energy supply.
The finance plan will now be reviewed by lawmakers in parliament before final approval in mid-December.