Berlin Braces for Financial Overhaul: New Government's 2025 Federal Budget Agenda
Swift Action: Government Outlines Strategies for Expediting 2025 Federal Budget Resolution - Federal government set to expedite budget planning for 2025, as announced by Frei.
Get ready for a rollercoaster ride, folks! The freshly minted German federal government has hit the ground running, promising some seismic shifts in the country's financial landscape.
With no parliamentary-approved budget for the current year, wings have been clipped for the outgoing federal government. The collapse of the traffic light coalition left them without a majority in the Bundestag, forcing them to operate under a restrictive provisional budget.
This provisional budget rules limit the government's wiggle room, but Article 111 of the Basic Law eases some of the tension by allowing them to maintain essential operations, carry out ongoing construction projects and procurements, and meet existing obligations—including doling out social benefits like parental leave and unemployment benefits.
Thorsten Frei, the parliamentary business manager, hinted that discussions regarding the 2026 federal budget should commence as early as summer. The planned new government of Union and SPD aims to embed their "political priorities" into budgetary law with this budget.
One urgently needed change on the horizon? A law to tweak depreciation possibilities for companies, effective retroactively from the beginning of the year. Frei proposes passing this legislation before the summer recess.
The CDU politician echoed his suggestion to postpone the summer break for the Bundestag. With an ambitious workload impending from the coalition agreement, the new government has a towering to-do list ahead—especially since parliamentary sessions have been few and far between since the traffic light coalition's downfall. Frei expressed hesitation about a hasty summer recess, stating, "It goes against the grain in me."
At the moment, the parliamentary summer recess is scheduled for July 14, with the new federal government set to take office on May 6. The Bundestag has scheduled two weeks of sessions starting from May 12 onwards.
Now, here's a quick glance at some changes and reforms the government has in store:
- Constitutional Debt Brake Reform: In March 2025, Germany amended its debt brake, introducing greater flexibility for spending in areas such as defense and infrastructure. This revision also established a €500 billion extrabudgetary fund for infrastructure projects[2][3]. The aim is to boost rearmament and close infrastructure gaps.
- Provisional Budget and Spending Trends: The first quarter of 2025 saw federal expenditure reach €122.7 billion, with investment spending soaring by 79.1% compared to the previous year, mainly due to financial assistance[1]. The incorporation of Renewable Energy Sources Act (EEG) costs into the core budget has also contributed to the increased spending[1].
- Coalition Agreement and Fiscal Reforms: The 2025 Coalition Agreement emphasizes refining the debt brake and enhancing economic competitiveness. By the end of 2025, an expert commission will be established to generate proposals for debt brake reforms[4]. The agreement also prioritizes creating a competitive economy through structural reforms and investments[4].
- Retroactive Depreciation Legislation: No specific information was found on a law for retroactive depreciation possibilities for companies within search results. Nevertheless, the government's focus on ensuring financial stability and bolstering business and innovation hints at potential adjustments to financial policies[4].
So, buckle up, folks! The new German federal government is gearing up for a dramatic fiscal overhaul with a focus on balancing fiscal responsibility, strategic investments, and strategic reforms in an effort to strengthen the economy and promote growth.
- The federal government's limited wiggle room due to the provisional budget has not deterred the plans for an overhaul in the country's financial landscape.
- Thorsten Frei has suggested that the 2026 federal budget discussions should initiate as early as summer, with the aim of embedding the new government's political priorities into budgetary law.
- One immediate change that Frei proposes is passing legislation to retroactively adjust depreciation possibilities for companies, effective from the beginning of the year.
- The new government's to-do list is towering, with the focus on balancing fiscal responsibility, making strategic investments, and implementing structural reforms to strengthen the economy and promote growth.
