Germany's budget committee finalised the 2027 budget, which includes total new borrowing of more than €210 billion. The package proposes €561 billion in spending, and the coalition dropped or delayed several tax plans to reach a deal. Opposition parties accuse the government of concealing borrowing.
Germany's budget committee finalised the 2027 budget, including more than €210 billion ($222 billion) in total new borrowing, people familiar with the matter said on Friday. That is the second-highest amount since World War Two.
The committee agreed the package, which proposes spending of €561 billion, in the early hours of the morning. Negotiations lasted weeks.
Borrowing falls just short of the 2021 record
Total new borrowing reached €210.4 billion, just under the record €215.4 billion recorded in 2021 during the COVID-19 pandemic. Of that, some €123 billion comes from the core budget.
The core budget figure does not include additional borrowing authorised under special measures. Those measures allow greater spending on infrastructure and defence and were agreed last year.
Coalition drops and delays tax plans
To secure agreement, the coalition dropped or delayed plans for taxes on plastics and sweetened drinks, as well as cuts to social security. Late on Wednesday, officials agreed to scrap a proposed tax on plastic packaging materials that cabinet had agreed in July, and to delay a tax on sugared drinks until 2028.
A planned cut to an electricity tax that Chancellor Friedrich Merz had championed was also delayed. Officials additionally agreed to roll back plans to cut benefits for the children of low-income families.
Merz's coalition has vowed a major push to strengthen core infrastructure and rebuild the military. But it has struggled to reconcile the priorities of his conservative Christian Democrats and their centre-left Social Democrat partners.
Opposition accuses government of concealing borrowing
Parliament is now free to pass the package. However, opposition parties accused the government of using tricks to conceal borrowing and spending on basic income support.
Sebastian Schaefer, budget spokesperson for the opposition Greens, said in a statement: "This is not sound budgetary policy, but a massive smokescreen."
Source: Investing.com (Reuters)
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