Investment Environment
Germany’s Governing Coalition Presents Plan for 2024 National Budget
The German government has agreed to cut environmentally unfriendly subsidies, accelerate tariffs on CO2 and target funds more efficiently while avoiding most new debt.
Dec 13, 2023
German Chancellor Olaf Scholz, German Minister for Economic Affairs and Climate Action Robert Habeck and German Finance Minister Christian Lindner announced the deal after weeks of negotiations.
“The government is standing by its goals,” Scholz told reporters at the Chancellor’s Office.
Germany’s coalition partners were forced to rethink their budget plans after the country’s highest court ruled the government could not use credit lines originally approved to combat the effects of the coronavirus pandemic.
That opened up a potential billion-euro hole in the German budget. It will be filled by a combination of reduced expenditures and increased revenue. Environmentally unfriendly subsidies for diesel and kerosene have been targeted, and tariff hikes on CO2 will come into force earlier.
Expenditures for the Climate Transformation Fund (KTF) will be cut initially by some EUR 12 billion, but the initiative will still have a volume of around EUR 160 billion until 2027.
“All the central programs of the KTF will be continued,” the Ministry for Economic Affairs and Climate Action said in a statement. “The core 2024 budget features a large number of consolidations. It also foresees an earlier end of the environmental premium for electric vehicles and new revenues. Environmentally unfriendly subsidies will be discontinued, and a tariff on plastic will be introduced.”
The plan now goes to Germany’s parliament, the Bundestag, for deliberation. It is expected to be approved in January 2024.
"This is welcome news and will serve to dispel potential concern in the business world over Germany's budget,” said Robert Hermann, CEO of Germany Trade & Invest, the country’s international business promotion agency. “It's important to realize that this situation was never about whether Germany was going to fund the transition to clean energy and future technologies to secure lasting prosperity, including promised subsidies for companies expanding to the country. The issue was, rather, about precisely how these ground-breaking initiatives would be funded. The governing coalition's plan should go a long way toward easing any worries on that score."
