Germany's 2025 Budget Plans: Balancing Growth, Defence, and Spending Caps

The German cabinet is set to approve a draft for the 2025 budget, which faces a 17 billion euro shortfall. The budget aims to balance economic growth and military upgrades while adhering to strict borrowing rules. The draft includes significant investments and addresses financing gaps through 2028.

The German cabinet is poised to approve its draft for the 2025 budget on Wednesday, despite facing a 17 billion euro shortfall, according to finance ministry sources. This comes after Germany's coalition government clinched a 2025 budget deal aimed at stimulating economic growth while respecting the country's borrowing constraints.

The proposed 2025 budget includes a record 78 billion euros in investments, 43.8 billion euros in net borrowing, and a total budget size of 481 billion euros, adhering to the constitutionally-enshrined debt brake. This budget also encompasses mid-term financial planning until 2028, the year NATO's armed forces special fund is set to expire.

Finance Minister Christian Lindner emphasized that the budget is not austerity-focused but prioritizes key areas like military spending, which exceeds NATO's 2% of GDP target. The budget will fund defence, tax cuts worth 23 billion euros, and investments in education, research, science, and families. The government plans to pass a supplementary budget for the current year with 11 billion euros in additional borrowing.

(With inputs from agencies.)