German budget 2024: Record funding for defence and cuts to Elterngeld
Germany’s coalition government has now published its draft federal budget for 2024. Funds are 30 billion euros tighter than last year, and the country’s military defence budget will reach record highs.
German government publishes draft budget for 2024
According to its draft budget published on July 4, the German government expects to spend 445,7 billion euros in 2024, 30 billion euros less than in recent years.
German Finance Minister and leader of the FDP, Christian Lindner, has set 2024 borrowing at 16,6 billion euros and said that the government will keep a close eye on spending in the coming years, after two years of emergency spending to cushion the blow of the coronavirus pandemic and energy crisis.
Lindner’s plan to borrow 16,6 billion is in accordance with the German debt brake (Schuldenbremse), a fiscal rule adopted in the Basic Law (Grundgesetz) in 2009 to limit government borrowing to no more than 0,35 percent of GDP. This is a significant cut compared to the 2023 budget, which planned for 45,6 billion in borrowing. Though it is enshrined in the constitution, the Schuldenbremse has been suspended since 2020 so that the government could borrow to fund emergency policies.
Lindner’s draft policy has made cuts in some areas to make sure that the budget is compliant with Germany’s Shuldenbremse; defence and climate policy have been prioritised, but government funding for families has been cut.
What will the German government spend money on in 2024?
The road to producing the budget has been a long one, but the final draft has now been officially approved - the draft should pass through the Bundestag in early December. Before then, some changes may be made to how the budget will be distributed. For now though, these are some of the most significant changes to how the German government plans to allocate funds in 2024:
Defence spending will reach record highs
Up from 50 billion in 2023, the German government has set aside 51,8 billion for military defence in 2024, reaching the NATO-set target of member states pouring 2 percent of annual GDP into the alliance. This is the first time that the German government will meet this target.
Portions of defence funding are also set to go into purchasing military fighting vehicles like the F-35 stealth jet and creating more secure communication channels.
Funding for climate policy will be cut
Though the budget draft claims that defence, digitisation, climate policy and demographic development are all being prioritised, only Germany’s Ministry of Defence can expect more money in 2024 than in 2023. Funding for climate policy will likely be cut by 5,8 percent, from 14,568 million in 2023 to 10,995 million in 2024.
The 45-billion-euro budget planned for Deutsche Bahn developments until 2027, which was announced by the government back in March, will now only be covered “as far as financially feasible” meaning that the major update designed to rejuvenate the national rail company’s ageing infrastructure will be slower. A funding figure of up to 34 billion euros is now being floated as more likely.
Separate from the budget, Germany’s Climate Transformation Fund (KTF), which collects funds from emissions trading and CO2 pricing, is expected to supply funding of 15 billion over the next two years.
Elterngeld income limit will be halved
One of the most significant cuts in the budget is Lindner’s plans to halve the income threshold for couples who are eligible to receive Elterngeld (parental allowance).
At the moment, all new parents who are EU, German citizens or residents in Germany, who care for their child and work no more than 32 hours per week, qualify for the social security benefit so long as their combined annual income does not exceed 300.000 euros before tax.
According to the new budget, the amount of money that eligible parents will receive from Elterngeld will not change, but the combined income threshold for eligibility will be halved to 150.000 euros before tax per year. Critics have said that the new policy will mean that equally dividing childcare work will be harder if one parent earns significantly more and that the cut may come as a nasty surprise for parents expecting children in the near future.
Overall the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth is expected to see a budget cut of 218 million euros.
Healthcare funding will be reduced post Corona
Following high funding during the coronavirus years, spending on health and nursing care will be shrunk from 24,483 million in 2023 to 16,221 million in 2024.
Significantly, the 1-billion-euro budget for long-term care insurance (Pflegeversicherung) will be cut, though SPD Health Minister Karl Lauterbach claims that these cuts will not result in a benefits cut, since the gap will be filled by increased contribution rates which were adopted from July 1, 2023.
Government subsidies for statutory health insurance will be lower in 2023, meaning that increased contribution rates are becoming more likely.
More money for pension insurance and Bürgergeld
Funding for work and social affairs is by far the biggest allocation in the budget, taking over a third of the 445,7 billion in funds.
Of the 166 billion that will be dedicated to work and social affairs in 2024, 127 billion will be allocated to pension insurance (Rentenversicherung). As people live longer and Germany faces a record-high worker shortage, the country’s pension system, whereby younger, working people fund the pensions of the retired, is becoming increasingly imbalanced.
Funding for Bürgergeld (citizens’ income benefit) is also to be increased from 23,8 billion in 2023 to 24,3 billion next year.
German government budget 2024
The 2024 budget has now been officially approved but could still be amended. It is expected to pass through the Bundestag in December 2023.
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