2024-07-10 16:53:36
Shortly before the summer break, the heads of the federal government have achieved a breakthrough. The basic political principles of the budget have been agreed, and the economy is also to be stimulated. What’s in it?
It was once again a marathon negotiation. But early in the morning, Chancellor Olaf Scholz (SPD), Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens) achieved a breakthrough. After difficult talks, there is now a basic agreement on the 2025 federal budget. The federal government is also planning a growth package.
The debt brake anchored in the constitution must be adhered to. It allows new debts to a limited extent. This is a point win for the FDP. It has fended off all demands, especially from the SPD, to make an exception to the debt brake because of the financial burdens caused by the war in Ukraine.
Only minimal growth is expected in Germany this year. Companies are holding back on investments, and private consumption is not picking up either. The government wants to counteract this and is planning comprehensive relief measures to stimulate the economy. According to the government’s estimates, the growth package could lead to additional growth of more than half a percent next year, which would be 26 billion euros in additional economic output.
There will be accelerated depreciation of investments and an improved research allowance. The traffic light coalition also wants to reduce bureaucracy. Mandatory practice checks are to be introduced in all ministries. Data protection is to be “streamlined” in order to relieve the burden on small companies in particular. The European supply chain directive is to be quickly implemented into national law. The main aim is to reduce reporting obligations, as a German law already exists.
Incentives for more employment – that is the aim of the traffic light coalition in view of the growing shortage of skilled workers. More employment also means that the burden on social security funds is reduced. Habeck stressed that stimulating the labor market has “the greatest growth potential.”
Working beyond retirement age should become more attractive. The employees affected should receive their employer’s contribution to unemployment insurance and partly also to pension insurance in the future. Foreign skilled workers will be granted a tax rebate in the first three years of their employment in Germany.
To make overtime worthwhile, the government wants to make extra pay for additional work that goes beyond the full-time hours agreed in the collective agreement tax-free and exempt from contributions. Full-time work is defined as a weekly working time of at least 34 hours for collective agreements, and 40 hours for working hours not specified or agreed in the collective agreement. The federal government also wants to create a new tax incentive to extend the working hours of part-time employees.
The coalition also wants to target foreign applicants for work: in future, immigration offices will only have 14 days to reject a foreigner’s application to work in Germany – otherwise the job will be considered approved.
One and a half years after the introduction of the citizen’s allowance, the coalition wants to tighten the duty to cooperate. Anyone who is available to the job market at short notice will have to report to the Federal Employment Agency once a month. Rules on the reasonableness of the work offered will be further developed.
The waiting periods for protected assets are to be halved – currently, in the first year of receiving citizen’s allowance, there are increased allowances for assets and the suspension of checks on accommodation costs. However, if long-term unemployed people leave citizen’s allowance with a job, they should keep significantly more of their earnings in the first year without this being counted towards housing benefit, for example.
The child benefit supplement for needy families in the citizen’s allowance is to be increased by five euros next year. This amount is to rise from the current 20 euros to 25 euros and will expire with the introduction of basic child benefit, according to a paper seen by the dpa. The child benefit that all parents in Germany receive per child will then rise to 255 euros per month, according to the agreement.
There are also changes to the child allowance. As the paper further states, this is to be increased by 228 euros to 9,540 euros this year. Next year it will be increased by another 60 euros to 9,600 euros. The allowance is deducted from taxable income and therefore reduces tax for families.
According to Lindner, citizens will receive tax relief totaling 23 billion euros over the next two years. The comprehensive relief will be made possible by increasing tax allowances, changes to wage and income tax, and shifts in the solidarity surcharge.