Amidst protracted negotiations, the German government achieved a breakthrough on Friday, finalizing both the 2025 budget and a stimulus package designed to bolster Europe's economic powerhouse. This resolution brings to a close months of intense debate that cast a shadow over Chancellor Olaf Scholz's center-left coalition, threatening its stability.
Scholz, representing the Social Democrats, along with the leaders of the Free Democrats and the Greens, emerged from marathon talks in the early hours of Friday, reaching an agreement on the budget, as reported by the German news agency dpa, citing party sources. A subsequent news conference was scheduled for later that day, where the leaders were anticipated to elaborate on the details of the deal.
Scholz ascended to the chancellorship in 2021, succeeding the long-standing conservative leader Angela Merkel. His coalition government embarked on a modernization agenda, focusing on climate protection measures, infrastructure development, and research initiatives. To finance these ambitious goals, the administration initially exploited 60 billion euros (approximately $65 billion) in unspent emergency funds allocated for COVID-19 relief measures, bypassing the restrictions on public borrowing.
However, in November 2023, the Constitutional Court struck down this maneuver as illegal, forcing the government to scramble for spending cuts in various areas, including farm subsidies and overseas development aid. This fiscal squeeze widened divisions within the Social Democrats and exposed the contrasting viewpoints of the more fiscally conservative Free Democrats and the environmentally conscious Greens. The Greens advocated for suspending the so-called debt brake rule, permitting additional emergency borrowing to continue supporting Ukraine amidst its ongoing conflict with Russia and to strengthen Germany's own defense capabilities.
The persistent disagreements fueled speculation that the government, already facing declining popularity, could dissolve, triggering a snap parliamentary election. Such an eventuality raised concerns about Germany potentially echoing the trend seen in other European nations, where voters have shifted their support towards the political right.
