What you need to know now about the 2024 budget

NAfter the Federal Constitutional Court's ruling in mid-November, the matter seemed clear: the traffic light coalition must save, and hugely. Two months later, after the crucial adjustment meeting for the 2024 federal budget, things look a little different. The final paper contains many plus signs that indicate increasing spending flexibility for the ministries.

Klara Geywitz's (SPD) building ministry has particular reason to be happy. It has an additional 1 billion euros at its disposal to at least give a little boost to the weakening new construction in Germany. 10 million euros of this are available for expenditure this year, plus a commitment authorization for the coming years of 990 million euros.

More for salvation and knowledge

Labor Minister Hubertus Heil (SPD) also has a big plus of 4 billion euros compared to the government draft. The reasons are not least citizens' money and the federal government's contribution to the costs of accommodation and heating. Both of these more than compensate for the planned savings, for example with the help of the new sanction for total refusers and the lower subsidies for pension insurance.

In the budget of Transport Minister Volker Wissing (FDP) there is an additional 4 billion euros for higher equity capital for Deutsche Bahn, a subsidy of 1 billion euros for the railways and almost 1.3 billion euros for broadband expansion. Smaller cuts push the increase in spending in his individual plan to just under 5.5 billion euros. Education Minister Bettina Stark-Watzinger (FDP) can spend 1.3 billion euros more. There are around 500 million “on top” each for families, health, foreign affairs and domestic affairs.

Expenditure on federal debt is likely to increase somewhat more – by almost 650 million euros to almost 39.6 billion euros. The traffic light budget politicians have also made provisions for the FDP's pet project: 12 billion euros to build up a capital stock to stabilize the statutory pension insurance. 3.5 billion euros were added to the military training of Ukraine. Almost 2.7 billion euros have been earmarked for Ahrtal reconstruction aid.

All in all, the revised budget provides for expenditure of 476.8 billion euros. Investments account for 70.5 billion euros of this. A net borrowing of 39.028 billion euros is planned, which corresponds exactly to the maximum amount permitted under the debt rule. The traffic lights don't really save money, criticized CDU budget politician Christian Haase. Otto Fricke from the FDP was satisfied that the coalition did not have to rely on an emergency. However, compliance with the debt brake is subject to reservations, as his coalition colleague Dennis Rohde from the SPD emphasized: “The fight for freedom in Ukraine must not fail because of a conservative view of the debt brake in Germany.” Green MP Sven-Christian Kindler praised cuts in the welfare state would be avoided.

Two factors in particular have increased the scope for red-green-yellow budget politicians: On the one hand, last year ultimately ended better than expected for the federal government, so that it was able to conserve the reserves that it had built up over the “good” past decade. On the other hand, the debt rule allows noticeably more debt than was expected six months ago when the cabinet approved the draft budget. In addition, the stock pension and equity support for Deutsche Bahn further expand the scope for credit. Because if loans are taken out to finance financial assets, this increases the permissible debt limit.

So the budget politicians were able to increase the traffic light in favor of Geywitz. The pressure was great after devastating figures from the construction industry. Up to and including November, building permits had only been issued for 238,500 apartments. As a reminder: 400,000 new apartments should be built every year. So now there is a new item in individual plan 25: “Climate-friendly new building in the low-price segment – ​​residential buildings with small to medium-sized units”, KNN for short.

The coalition justifies that the 1 billion euros should be reserved for construction projects with small apartments by saying that there is a lack of affordable apartments for single parents and seniors in metropolitan areas. The aim is to support the construction of apartments that are offered at prices in the lower third of the rent index. Many details are still open. But one thing is clear: Funding will only be available if the energy efficiency standard of the houses exceeds the legal minimum. Over the life cycle of the building, it should meet the KfW Efficiency House 40 (EH 40) standard. Such a house only requires 40 percent of the energy of a so-called reference building. The EH 55 standard has been legally required since the beginning of 2023.

Associations from the construction and housing industry reacted happily to the news. It is “exactly the right signal,” said Axel Gedaschko, President of the General Association of the Housing Industry (GdW). The main association of the construction industry warned that construction costs should not be driven up by unnecessarily high requirements. Compared to before, the funding for the new building is still manageable. In 2022, the federal government spent more than 10 billion euros on this. Then, for climate protection reasons, the focus was shifted to energy-efficient renovation of the existing buildings.