The national debt continues to explode! Because of the poor economic situation, the federal government wants to take on five billion euros more in debt in 2025, according to a paper from the Ministry of Economic Affairs (available from BILD).
Background: The federal government has revised its economic forecast significantly downwards. It assumes a decline in economic output of 0.2 percent in 2024. What is bad news for all of Germany gives the government more leeway in its budget for next year.
Because: The recession this year will allow the government to take on even more debt in 2025 (“economic component”, exception to the debt brake)!
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▶︎ Economics Prof. Veronika Grimm (53) on BILD: “Weak growth will certainly lead to the ability to take on more debt through the cyclical component. That’s what she’s there for. However, tax revenues will fall more sharply as this debt scope increases over the cyclical component. Overall, the developments are increasing the financing problems. You will have to prioritize spending more.”
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This means that the traffic light may absorb more on credit, but it will also take in less!
It was already clear: In compliance with the debt brake, new debt will be 51.3 billion euros in 2025, significantly higher than initially planned. For the 2025 financial year, the federal government is planning to spend 488.6 billion euros.
Net borrowing is expected to correspond to more than a tenth of the entire budget (over two percent more than last year). There will still be a financing gap of around twelve billion euros for 2025 – which the government wants to close with more new debt.
Nevertheless, the SPD and the Greens would like to completely suspend the debt brake and take out even more loans.
▶︎ Ex-Wirtschaftsweise boss Prof. Lars Feld (58) makes it clear to BILD: “It is not necessary to reform the debt brake. Rather, it is imperative to examine all expenditure items in the federal and state budgets and to relieve the municipalities of social spending.”
▶︎ Ifo President Prof. Clemens Fuest (56) told BILD that the possibility of higher new debt shows “that the debt brake, contrary to what critics claim, does take the economic situation into account”. However, given the deteriorating economy, Fuest believes the additional debt is appropriate.
