The coalition government will face difficult trade-offs to agree on the 2025 budget by this summer. Savings of EUR 15bn-EUR 30bn (3.2% to 6.3% of the 2024 budget) need to be found, requiring spending cuts across most ministries. Such cuts often result in lower net investment, leaving the government less able to address Germany’s longer-term challenges.
Germany Retains Significant Room for Fiscal Manoeuvre to Tackle Longer-term Challenges
Germany’s fiscal position stands in sharp contrast to the public finances of Europe’s other large economies, including the United Kingdom, France and Italy, which all face high government deficits as well as high and, in the absence of credible fiscal consolidations plans, rising public debt over coming years.
Germany continues to have significant fiscal space…
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