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Leaders of Germany’s three-party ruling coalition have agreed on a new draft budget for next year after weeks of tense negotiations that mired the government in political and fiscal crisis.
“The government is sticking to its goals,” Chancellor Olaf Scholz said in Berlin. “We are pressing ahead with the climate-neutral conversion of our national energy system. We are strengthening social cohesion. And we are standing by Ukraine in its defensive fight against Russia.”
But, he added, “it’s also clear that we have to make do with significantly less money to achieve these goals.”
The government will not immediately seek to declare an emergency for 2024 in order to suspend the debt brake, which strictly limits deficit spending. Rather, the leaders of the ruling coalition said they had agreed on a variety of spending cuts to plug an estimated €17 billion financial gap for the year.
Yet, Scholz also kept open the door to a potential debt brake suspension for 2024 should the war in Ukraine escalate, requiring Germany to provide more aid to the country.
“If the situation worsens as a result of Russia’s war against Ukraine, for example because the situation on the front deteriorates or because other supporters reduce their aid to Ukraine or because the threat to Germany and Europe increases further, we will have to respond to this,” Scholz said.
Germany’s ruling coalition had been in disarray since a bombshell ruling by the country’s top court last month blew a €60 billion hole in its finances. With the draft agreement today, the leaders of the three-party coalition — comprised of the center-left Social Democrats, the Greens and the fiscally conservative Free Democrats — hope to quell the crisis.
The proposed budget for 2024 will still need to be approved in parliament before taking effect early next year.
The draft agreement comes just as Scholz is set to fly to Brussels Wednesday afternoon for an EU-Western Balkans summit, as well as a crucial EU leaders’ summit on Thursday and Friday. There, the leaders will aim to agree on opening EU accession talks with Ukraine and on providing further defense funding for Kyiv. The leaders must also reach a budget deal on EU spending for the coming years.