Recond funding for defence and cuts to Elterngeld

Germany’s coalition government has now published its draft federal budget for 2024. Funds are 30 billion euros tighter than last year, and the country’s military defense budget will reach a record high. .

The German government has published the draft budget for 2024

According to the draft budget published on July 4, the German government expects to spend 445.7 billion euros in 2024, 30 billion euros less than in recent years.

The German Finance Minister and head of the FDP, Christian Lindner, set the 2024 borrowing at 16.6 billion euros and said that the government will closely monitor spending in the coming years, after two years of emergency spending to prevent the outbreak of the coronavirus pandemic and energy crisis.

Lindner’s plan to borrow 16.6 billion is in line with the German debt brake (Schuldenbremse), a financial rule adopted in the Basic Law (Grundgesetz) in 2009 to limit government borrowing to no more than 0.35 percent of GDP. This is a significant reduction compared to the 2023 budget, which plans for 45.6 billion borrowing. Although it is included in the constitution, the Schuldenbremse suspended since 2020 so that the government can borrow to finance emergency policies.

Lindner’s draft policy made cuts in several areas to ensure that the budget was in line with Germany’s Shuldenbremse; Defense and climate policy were prioritized, but government funding for families was cut.

What will the German government spend in 2024?

The road to making the budget has been long, but the final draft has now been officially approved – the draft should go through the Bundestag in early December. Before that, some changes can be made in how the budget is distributed. For now though, these are some of the most important changes to how the German government plans to allocate funds in 2024:

Defense spending reaches record high

From 50 billion in 2023, the German government allocated 51.8 billion for military defense in 2024, reaching the target set by NATO of member states pouring 2 percent of the annual GDP into the alliance. This is the first time the German government has reached this target.

Parts of the defense fund are also set to buy military combat vehicles such as the F-35 stealth jet and build more secure communications channels.

Funding for climate policy will be cut

Although the draft budget says that defense, digitization, climate policy and demographic development are all prioritized, only the German Ministry of Defense can expect more money in 2024 than in 2023. The funding for the climate policy is likely to be cut by 5.8 percent, from 14,568 million in 2023 to 10,995 million in 2024.

The 45-billion-euro budget planned for the improvements of the Deutsche Bahn until 2027, announced by the government in March, will only be covered “as far as financially feasible” which means that the major updates designed to revamp the aging national rail company. the infrastructure is slower. A funding figure of up to 34 billion euros is now being floated as more likely.

Apart from the budget, Germany’s Climate Transformation Fund (KTF), which collects funds from emissions trading and CO2 pricing, is expected to provide funding of 15 billion over the next two years.

Elterngeld the income limit is halved

One of the most significant budget cuts is Lindner’s plan to cut the income threshold for eligible couples in half. Elterngeld (parental allowance).

Currently, all new EU parents, German citizens or residents of Germany, who care for their child and work no more than 32 hours per week, are eligible for social security benefits as long as the their combined annual income does not exceed 300.000 euros before tax.

According to the new budget, the amount of money that eligible parents will receive Elterngeld will not change, but the combined income threshold for eligibility will be divided in half by 150.000 euros before tax per year. Critics say the new policy means an equal division of childcare work will be more difficult if one parent earns more and that the cuts could come as a blow. which is a surprise for parents who are expecting children in the near future.

Overall the German Ministry for Family, Elderly, Women and Youths is expected to see a budget cut of 218 million euros.

Health care funding will be reduced after Corona

After the high funding of the coronavirus years, spending on health and care will decrease from 24,483 million in 2023 to 16,221 million in 2024.

Significantly, the 1-billion-euro budget for long-term care insurance (Pflegeversicherung) will be cut, although the SPD Health Minister Karl Lauterbach claims that these cuts will not result in a cut in benefits, as the gap will be filled with additional contribution rates adopted from July 1, 2023.

Government subsidies for statutory health insurance will be reduced in 2023, meaning an increase in contribution rates will be more likely.

More money for pension insurance and Bürgergeld

Funding for work and social activities is the largest budget allocation, taking a third of the 445.7 billion funds.

Of the 166 billion that will be dedicated to work and social activities in 2024, 127 billion will be allocated to pension insurance (Rentenversicherung). As people live longer and Germany faces a record-high labor shortage, the country’s pension system, where young, working people fund retirees’ pensions , growing imbalance.

Funding for Bürgergeld (citizen income benefits) should also be increased from 23.8 billion in 2023 to 24.3 billion next year.

German government budget 2024

The 2024 budget has now been officially approved but is still subject to change. It is expected to pass the Bundestag in December 2023.

Thumb image credit: Michele Ursi / Shutterstock.com