Germany's Coalition Secures 2025 Budget Amidst Tensions

Germany's coalition government, comprising the SPD, Greens, and FDP, has reached an agreement on the 2025 budget adhering to the nation's strict spending rules. The budget aligns with the debt brake, allowing deficit spending of 0.35% of GDP, opposing their initial investment plans. Defence spending sees a boost amidst ongoing tensions.

Germany's coalition government has clinched an agreement on the budget for 2025 that will adhere to the country's strict spending rules following months of negotiations, government sources told Reuters on Friday. Chancellor Olaf Scholz's Social Democrats (SPD), Economy Minister Robert Habeck's Greens and Finance Minister Christian Lindner's Free Democrats (FDP) have been battling to resolve differences over future cuts and spending plans.

Lindner had stressed the importance of returning to the nation's constitutional enshrined cap on spending, known as the debt brake, and called on a number of ministries to find cuts. The SPD and Greens, on the other hand, had called for leeway to allow funds for investment.

A government source said that the agreement on the budget and medium-term financial planning up to 2028 adhered to the debt brake, which allows deficit spending of 0.35% of gross domestic product. Details on the budget agreement and an accompanying package of measures to boost Germany as a location for business are expected later on Friday, according to one of the sources.

DEFENCE BOOST Infighting over spending has cast further doubt over the fitness of the coalition, which has rowed repeatedly since taking office in late 2021 in a term marked by economic slowdown, high energy costs and the war in Ukraine.

"In view of the state of the world, it would be irresponsible to let the coalition collapse," said Anton Hofreiter, a leading member of the Greens in the Bundestag parliament, welcoming news of the budget agreement. While other ministries tightened their belts, the Defence Ministry has been promised more funds as Germany ramps up spending on its long-neglected Bundeswehr military following Russia's invasion of Ukraine.

"The renewed increase in the defence budget underlines the high priority of modernising the Bundeswehr," FDP politician Marcus Faber, who heads the parliamentary defence committee, said in comments published by the Funke Media Group on Friday. "The government is setting the right priorities for the security of our republic," he added.

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