What happens if there is no German budget by the New Year?

The clock is ticking for the German government to finalise a 2025 federal budget. What will happen if politicians cannot agree on how to finance benefits, infrastructure and services by the New Year?

2025 German federal budget still unclear

It’s crunch time for the German federal budget. In November, Chancellor Olaf Scholz (SPD) sacked Finance Minister Christian Lindner (FDP) for failing to cooperate with SPD and Greens coalition partners. The coalition subsequently collapsed, before a 2025 budget could be agreed upon.

With Scholz running a minority government, the Chancellor faces a confidence vote on December 16 and a snap election is scheduled for February 23, 2025. 

But as election campaigns begin and Scholz tries to hastily push through unfinalised policy promises, such as the Regionalisation Act and decriminalising abortion, the government must also finalise next year’s budget.

What happens if the German government can’t agree on a budget?

Regardless of whether Scholz wins or loses the no-confidence vote, the German parliament will be dissolved on December 27, 2024, ahead of the likely snap election. If no 2025 budget has been finalised by this date, the “provisional budget management” clause of the German Basic Law (Grundgesetz) will be implemented.

The “provisional budget management” clause allows those in office to continue funding all existing, basic institutions, construction projects and services, fulfil any legal funding obligations and fund new projects that have already been agreed upon. This includes existing housing and child benefits, any agreed-upon Deutsche Bahn construction projects and financial support for Ukraine, among other policies.

But until a 2025 budget is finalised, new programmes cannot be funded and the government cannot take on new debts. For example, government plans to replace four separate child benefits with one bundle payment (Kindergrundsicherung) may be delayed or entirely abandoned.

Neighbouring France finds itself in a similar situation to Germany. A “stopgap” which carries the 2024 budget into 2025 has been prepared after the far-right National Rally and far-left New Popular Front disagreed on parts of the 2025 budget and toppled Prime Minister Michel Barnier last week.

France’s “stopgap” and Germany’s “provisional budget management” clause mean a government shutdown, as the US saw in 2018 / 2019, can be avoided.

When can we expect the 2025 budget to be ready?

After the likely federal election on February 23, 2025, drafting and agreeing upon a budget for the year will be the first task of Germany’s incoming government. 

On average, it takes new German coalition governments 264 days to agree upon a budget. This means the provisional budget may be in place until November 2025.

How long it takes the incoming coalition to agree this time and what the budget looks like largely depends on which parties make up the next federal coalition. 

While the Christian Democratic Union (CDU) is widely expected to take the majority of votes, politicians of the centre-right party are holding their cards close to their chests as to who the party will select as a coalition partner.

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