Germany's governing coalition has finally reached an agreement on the details of the country's 2025 budget after weeks of negotiations. The coalition, led by Chancellor Olaf Scholz, has been facing challenges due to frequent infighting among the three parties - the center-left Social Democrats, the environmentalist Greens, and the pro-business Free Democrats.
Financial issues have been a major point of contention within the coalition, with Finance Minister Christian Lindner and the Free Democrats pushing for strict adherence to Germany's rules on new debt and resisting tax increases. This has led to disagreements with other coalition members who seek exemptions from these rules.
In a recent setback, Germany's highest court overturned a government decision to repurpose funds meant for pandemic relief towards climate change initiatives, forcing the coalition to revise the 2024 budget. This move resulted in subsidy cuts that sparked protests from farmers.
The coalition leaders recently presented an agreement for the 2025 budget, which includes increased spending on defense, affordable housing, and a stimulus package for the economy. However, disagreements resurfaced over how to address a financing gap of approximately 17 billion euros.
After further negotiations, the coalition announced on Friday that the financing gap has been reduced to around 12 billion euros. This reduction was achieved through restructuring how funds will be allocated to the national railway. The budget will now be presented to lawmakers for consideration.
