Federal budget 2027 with record expenditure is in place - still without a reduction in electricity tax

The federal budget for next year is ready for a vote in parliament – ​​at least for now. The responsible budget committee decided on a few changes to the ministries' budgets that night. However, it is still unclear whether the Union and the SPD can still finance a reduction in electricity tax for everyone. The approximately 5.4 billion euros required for this are not included in the draft.

During the 16-hour shake-up meeting, the ministers of the black-red coalition had to appear themselves - and sometimes had to wait outside the door for hours. The new Labor Minister Alexander Schweitzer (SPD) brought wine from the Southern Palatinate to the committee dinner. Defense Minister Boris Pistorius (SPD) was last in line. It wasn't until 6 a.m. that the hammer fell.

In 2027, the federal government will be allowed to spend more money than ever before in one year. Spending of around 560.9 billion euros is now planned - that is 5.5 billion more than the federal government had planned for in its government draft.

Every third euro in the budget is financed by debt. The committee gave the green light for loans of almost 123 billion euros in the core budget alone - four billion more than planned in the government draft. There are also billions in loans from special funds: 57.8 billion for infrastructure, 29.6 billion for the Bundeswehr. The bottom line is that there are new debts of around 210 billion euros.

The debt brake anchored in the Basic Law is still adhered to: loans in so-called special funds do not count, and certain debts for defense are also excluded.

The open electricity tax question

Normally, the so-called cleanup meeting of the powerful budget committee is considered a crucial step on the way to the adoption of a budget in parliament. What is passed in the budget committee is usually no longer changed. But that could be different this year, because a major controversial issue is still open. Can the electricity tax for all citizens and companies be reduced to the European minimum next year or not?

There is no money for this yet - but the Union hopes to clarify the financing with the SPD in the coalition committee on Tuesday. According to reports, discussions included using surpluses from the EEG account to promote renewable energies and cutting funding programs in the climate and transformation fund. The SPD is likely to view both critically. Or the CSU is giving up its pet tax policy project: expanding mothers' pensions.

If a compromise is achieved in the coalition committee, it could be introduced as an amendment into the final budget discussions in the Bundestag from November 24th to 27th. The fact that this is even being considered shows how much political capital is associated with the electricity tax. For Chancellor Friedrich Merz (CDU), who is a key advocate of the tax cut, it is about credibility - for citizens, however, it is only about compensation of a few euros per month for the high energy prices.

“The electricity tax is increasingly becoming a symbol of a federal government that makes big announcements but doesn’t act,” criticized Green MP Katrin Uhlig. The people needed noticeable relief instead of ever new promises.

Opposition householders complained that the budget generally stood on feet of clay. “Merz and Klingbeil are building a shack without a foundation with the 2027 federal budget,” said the Greens’ chief budget officer, Sebastian Schäfer, to the German Press Agency. Instead of leadership there are mutual blockages, instead of a strategy there is just “muddling through from month to month”.

Left-wing householder Dietmar Bartsch said: “This budget makes your blood run cold.” It contains record debts according to the principle “after us the flood”. The young generation would face gigantic interest payments and the harshest cuts, while at the same time increasing taxes and duties.

The coalition's budget holders, on the other hand, defended the budget: It sets clear priorities where they are important: "Civil protection, military defense and transport and research investments on the one hand are complemented by a strong welfare state," said Christian Haase from the Union. Thorsten Rudolph from the SPD emphasized that the coalition had managed to close a budget gap of 34 billion. “We save so that the budget works – but not what holds our country together and moves it forward.”

The debate about the electricity tax gives a foretaste of what could lie ahead for the Union and the SPD in the coming months. After the budget resolution for 2027, negotiations will begin for 2028 - and the coalition will once again have to compensate for a financing gap of around 25 billion euros.

There are even bigger holes in the financial planning for the years to come. Economists expect a financial gap of between 175 and 300 billion euros by 2040. “Even with tax increases and the toughest social cuts, this gap can only be halved if Lars Klingbeil’s budget madness continues,” Bartsch predicted.