MIL OSI – Source: German Ministry of Finance – in English –
Headline: Draft 2016 budget and financial plan to 2019: no new debt
On 1 July 2015, the federal cabinet adopted the government draft for the 2016 federal budget and the financial plan to 2019. There will be no new federal borrowing in any of the years covered by the financial plan. This means that the federal government is upholding its commitment to sound and reliable fiscal policies. Both the executed budget for 2014 and the current budget for 2015 were balanced, requiring no new borrowing.
Federal spending in the years up to 2019 will increase at a moderate pace, in line with higher government revenue. At the same time, the rate of federal spending growth will remain below the expected rate of GDP growth in the coming years.
The adopted budget documents also show that the government’s plan to top up federal investment by €10 billion will be put into action during the years from 2016 to 2018. This investment will be targeted towards transport infrastructure, digital infrastructure, energy efficiency, climate protection and urban development.
The budget also contains plans to increase the child tax exemption, child benefit, the child supplement, and tax relief for single parents. In addition, it includes steps to reduce tax bracket creep. These measures will provide over €5 billion in tax relief, especially for workers and families.
The adopted budget resolutions also continue the federal government’s policy of enhancing support for local authorities. For example, additional fiscal relief for local authorities, planned for 2017, will be increased from €1 billion to €2.5 billion. This comes on top of a newly adopted €3.5 billion fund to promote investment by local authorities with insufficient financial resources. In 2015, the federal government is allocating a lump sum of €1 billion to the Länder and local authorities to help pay for the cost of receiving and accommodating refugees. Starting in 2016, the federal government will provide the Länder and local authorities with sustained, structural relief in dealing with refugee-related costs.
The federal government will also significantly increase its spending on official development assistance (ODA) by a total of €8.3 billion during the period from 2016 to 2019. The goal here is to stabilise ODA spending at a level of 0.4% of gross national income.
By adopting balanced budgets that add no new debt, the federal government is making a decisive contribution to the further reduction of Germany’s general government debt ratio. A debt-to-GDP ratio of less than 70% will be attainable as early as 2016. This reflects a fiscal policy that aims to safeguard intergenerational equity and to ensure that Germany is well prepared for future challenges likely to result from demographic trends.
Government draft for the 2016 federal budget and the 2019 financial plan