Germany’s government had to adjust its budget for 2024 to the current geopolitical landscape. A major revision was made in favor of defense spending. The authorities introduced considerable spending cuts for all sectors except for the military in the draft budget. It is the only sector that will be pumped up with massive cash. Domestic defense enterprises are anticipating huge state orders.
After painstaking discussions, the cabinet came to the common denominator concerning the budget for the next year. On the back of geopolitical headwinds, the lion’s share will be allocated for defense spending at the expense of other articles of expenditure. Almost all social directions will be faced by the funding crunch but will be hardly affected in practice for the simple reason: they were overfunded with stimulus packages provided in the last few years to overcome the COVID-19 pandemic fallout and the energy crisis. The finance ministry allocated €476.3 billion in 2021 and €481.3 billion in 2022 for public spending. Compared to the budgets of the previous two years, the draft budget for 2024 worth €445.7 billion suggests financial austerity, federal Minister of Finance Christian Lindner commented on the changes. In this context, Germany’s public debt might swell to €16.6 billion that will hardly take its toll on the German economy.
On the whole, budget cuts will impact all basic articles of expenditures, besides defense. Amid the lingering geopolitical jitters in Europe, Germany is ready to provide 2% of its GDP for national security. At the same time, the social structure which used to be the top priority during the pandemic and the energy crisis will bear the brunt of budget cuts. For instance, the authorities are going to lower the threshold of the annual income of families with kids that will remain subject to benefits from €300,000 to €150,000.
Interestingly, the budget draft was approved later than usual. The proposed budget must still be debated by Parliament. Lawmakers are expected to vote by the year-end.
