The German government will toughen austerity in the new budget
After three years of massive spending to combat the Covid-19 pandemic and the subsequent Russian and Ukrainian energy crises, Germany is planning further budget cuts to reduce its debt.
The German Finance Minister, Christian Lindner, presented in the German Bundestag the budget of the coalition government for 2024, approved in the Council of Ministers.
According to the budget, the German government plans to spend about 445.7 billion euros next year.
This figure means approximately 30 billion euros more spending than the budget plan for 2023.
In next year’s budget it is estimated that income will amount to 445.7 billion euros, while expenses will be financed with a new debt of 16.6 billion euros.
It is noteworthy that the planned new debt is 30 billion euros less than last year.
‘WE CANNOT SOLVE ALL THE PROBLEMS WITH PUBLIC MONEY’
Lindner, in his budget presentation in parliament, emphasized that Germany’s 2024 budget is only a first step towards the necessary normalization in fiscal policy: “We need to accept our new spending realities. We cannot solve all the problems with public money”, he stated.
Calling attention to the rapidly increasing interest spending on the country’s debt following the rise in anti-inflation interest rates, Lindner claimed that interest payments alone will cost the public 37 billion euros next year.
“The interest expense in the budget is now double the budget of the German Ministry of Education and Research. We cannot afford new large debts,” he asserted. Lindner plans to return to the debt brake, which has constitutionally limited Germany’s budget deficit to 0.35 percent of its economic output.
Germany suspended the debt brake in the constitution for the period 2020-2022 to mitigate the effects of Covid-19 and the war between Russia and Ukraine. This allowed the federal government to finance recovery measures and recovery of the economy.
TOTAL SAVINGS PLAN OF 3,500 MILLION EUROS
The new budget provides for all the ministries, except Defense, to save a total of 3,500 million euros in 2024.
While the budget for employment and social spending increased from 166.2 billion euros to 171.6 billion euros, the country’s defense budget is expected to increase by 1.7 billion euros to 51.8 thousand millions of euros.
On the other hand, general public debt, defined according to the Maastricht criteria, increased by 71 billion euros in 2022, to approximately 2.57 trillion euros, according to data from the German Central Bank.
The ratio of public debt to nominal gross domestic product (GDP) also decreased from 69.3 percent to 66.4 percent, with an annual decline of 2.9 percentage points. (AA)