Berlin. Large chunks have been clarified - but not all of them yet: When the powerful budget committee meets in the morning for its crucial meeting for the 2027 budget, billions are still being sought. Because Chancellor Friedrich Merz (CDU) wants to reduce electricity taxes for everyone - and there is no money for that yet. The coalition does not want to write off the project completely, but it is extremely unlikely that the budget holders will raise the necessary around five billion euros for 2027.
The coalition members were able to clarify other controversial issues, especially taxes and the threat of social cuts, before the important meeting. Late on Wednesday they presented the agreement in the Bundestag hallways - and also the billion-dollar unresolved problems. In the end, the coalition solved every challenge that was presented to it, said the head of the CSU MPs, Alexander Hoffmann. “She will also succeed in doing this with the 2027 federal budget.”
With this compromise, the Union and the SPD are going into what is probably the most important committee meeting in the Bundestag today: the adjustment meeting. The parliamentary group's housekeepers spend hours putting the finishing touches to the budget, often until early in the morning. All ministers must come forward again and defend their spending plans. The really big questions have been clarified, but several million are often postponed until the budget is given the green light that night. In the negotiated form, it will then be finally voted on in the Bundestag during the week of the session from November 24th to 27th.
If the Union and the SPD have their way, the federal government will be able to spend more money next year than ever before. The core budget includes expenditure of around 555 billion euros. This is financed not only with tax revenue, but also with loans amounting to 118.7 billion euros. In addition, there are credit-financed investments from special funds for infrastructure and the Bundeswehr, so that the total debt is likely to add up to more than 200 billion euros.
When Finance Minister Lars Klingbeil (SPD) began drawing up the budget, there was still a financing gap of around 34 billion euros. The Ministry of Finance is proud to have closed it. However, this was achieved not only through savings, but also through reform decisions such as the introduction of a sugar tax on heavily sweetened drinks, a tax on plastic packaging, a higher tobacco tax and a higher tax on alcohol and crypto assets.
However, many of these top-level decisions did not last long. In the Bundestag, the Union again questioned various tax decisions. The SPD parliamentary group wanted to prevent cuts that would affect families - such as housing benefit and the immediate child allowance for low earners.
After long negotiations it is clear: the plastic tax is not coming for now. The sugar tax will also be postponed to 2028 - but a third tax level will be collected for additional income. Cuts of over 300 million euros in housing benefit will be reversed, as will the planned cuts in the immediate child allowance.
In order for the budget to work out, a little more money may have to be taken from a reserve. They actually wanted to save around four billion euros for 2028. Because there is still a gap of more than 25 billion euros in financial planning.
The Union faction not only defended itself against new and higher taxes, it also registered additional requests worth billions. The income tax reform planned by Klingbeil with a higher basic allowance, higher parental allowance and greater taxation of the highest incomes is not enough. The cold progression caused by inflation must be completely offset. This is a hidden tax increase: If your income increases due to inflation, you have to pay more taxes without being able to afford more with your money.
Compensating for this would cost the federal, state and local governments around 4.2 billion euros next year. Klingbeil was open to this - but asked the Union for funding proposals. According to reports, this did not exist in the last round of negotiations either. Union faction leader Thorsten Frei (CDU) emphasizes that the goal still remains. It may also be possible to discharge the burden retroactively.
The discussions became really difficult when Chancellor Merz, driven by the Union Prime Minister, decided: All citizens had to be relieved of their energy costs, and the electricity tax had to be reduced to the European minimum for all consumers and companies.
Here too, Klingbeil called for financing proposals. A reduction to the European minimum would cost around 5.4 billion euros annually. Merz could end up paying more for the whole thing. Because it is becoming apparent that his vehemently advocated plan is failing, at least for the time being.
In the Union parliamentary group, the mood shortly before the adjustment meeting was “poor,” said participants at a special meeting on Wednesday evening. The debate lasted significantly longer than that of the SPD. Last hope: somehow find money at the coalition committee next week.
