Germany: Agreement Reached on 2025 Budget

After long and tense negotiations, German Chancellor Olaf Scholz and ruling coalition leaders approved Germany’s federal budget for 2025. According to German newspaper Handelsblatt, citing “very well-informed government sources,” the agreement essentially stipulates that “the debt brake will also be respected next year” and “total budget spending should not exceed 470 billion euros.” This means that the government will save around €7 billion compared to 2024.

The compromise was reached against the backdrop of an increasingly disappointing economic situation in Germany, where industrial production in May collapsed by 2.5% in economic terms and by as much as 6.7% in trend terms, i.e. well below economists’ expectations. Industrial production fell 2.9% month-on-month, while construction production fell 3.3%. The overall result was negatively affected primarily by the decline in production in the automotive industry, recorded at 5.2 percent.