Germany’s Multi-Party Coalition Agrees on 2025 Budget Amid Economic Turbulence

Germany's coalition government finalized the 2025 budget to adhere to strict borrowing constraints while boosting economic growth and military expenditure. The agreement aims to counter economic uncertainty and rising far-right sentiment. Despite some industry support, the budget faces scrutiny as it heads to parliament, especially among SPD and Green activists.

Germany's coalition government clinched a 2025 budget deal on Friday that adheres to the country's stringent borrowing rules while providing a package aimed at invigorating economic growth and financing a substantial military revamp to meet NATO targets. The agreement followed months of negotiations in Chancellor Olaf Scholz's unpredictable three-way coalition, which has seen dwindling popularity amid a living cost crisis.

Chancellor Scholz presented the agreement as a lifeline for Germans during 'turbulent and difficult times' and a direct counter to the surge of far-right forces within Germany and across Europe, notably in neighboring France. Stressing the importance of economic stability and robust finances amid global 'economic and social changes,' Scholz addressed rising uncertainties fueling right-wing movements.

The budget outlines net borrowing of 44 billion euros, a record 57 billion euros in investment, and a total budget of 481 billion euros, with measures estimated to contribute an additional 0.1% to 0.2% growth next year. However, the deal also imposed spending cuts, particularly in humanitarian aid, while ensuring military spending remains above NATO requirements. Despite partial endorsement from business groups, the budget will undergo rigorous parliamentary processes amidst internal coalition challenges and upcoming regional elections.

(Disclaimer: With inputs from agencies.)