Preparation of Germany’s 2025 budget will be challenging – ministry sources say

By Christian Kraemer

BERLIN (Reuters) -The German Finance Ministry anticipates difficult preparations for 2025’s draft budget, in which it faces further cuts to spending, finance ministry sources said on Thursday.

At an internal government meeting on Thursday, the ministry mapped out the course for the 2025 federal budget and the financial plan up to 2028.

Other ministries must outline their spending wishes by April 19, but also make savings proposals. According to sources, the gap for the 2025 budget is estimated in a range of 15 billion to 25 billion euros.

Under the plan, there will be further political discussions in the coalition government of the Social Democrats (SPD), Greens and pro-business Free Democrats (FDP) until the cabinet approves the first draft on July 3, before the summer break.

The Bundestag lower house of parliament will then discuss the draft from September and pass it by the end of November 2024, the sources said.

“Germany is facing major economic and financial policy challenges,” wrote Finance Minister Christian Lindner in a letter seen by Reuters to the highest government authorities. “The medium-term growth figures are below those of previous years and there is a clear structural need for consolidation in the federal budget for future financial years.”

Lindner reiterated the need for a normalisation in spending. “It will require a concerted effort by the federal government to resolve the need for action in the federal budget,” Lindner said.

The medium-term financial plan did not include details for the year 2028. This is important because financing the German armed forces through a special fund will no longer be possible that year.

The regular defence budget will then have to increase significantly in order to meet Germany’s NATO obligations of 2%.

(Reporting by Christian Kraemer, Writing by Maria Martinez, Editing by Rachel More, Alexandra Hudson)