Austerity orders from Finance Minister Christian Lindner! There is a billion dollar hole in the German budget. Nevertheless, many ministries are sticking to their plans – whatever the cost. FOCUS online explains how the traffic light could plug the hole and what it will cost German citizens.

There is a huge gap in the budget planning for the coming year. Some say 15 billion, others say 25 or more. Only the Federal Ministry of Finance knows exactly how big the financing gap is – there they speak of a “double-digit billion amount”. The negotiations are unlikely to take place without disputes between the coalition partners. Because Lindner said on Monday evening in the ZDF program “How are you, Germany?” that some departments had “not yet internalized the economic realities”.

The reasons for the high deficit are varied. The economy is slowing down, the war in Ukraine is having an impact, as is the ruling by the Federal Constitutional Court, which last year withdrew billions from a special fund for climate protection. In addition, high interest rates are driving up additional federal spending. In 2024, new loans will be needed almost exclusively for interest payments – around 37 billion euros. Two years ago it was 15.7 billion euros.

Concrete measures have not yet been determined. At the end of the year, the Federal Environment Agency brought up the possibility of reducing subsidies. At the same time, basic child security, pensions and subsidies for the energy transition are on the savings plan. However, it is more than questionable whether the SPD and the Greens will really tackle these issues.

The savings plan could look like this:

Basic child protection

The planned basic child support could be delayed. There is a risk of high bureaucratic effort in administration, which could ultimately blow up budget planning. In their coalition agreement, the SPD, Greens and FDP agreed to introduce basic child welfare. Previous benefits such as child benefit, benefits from citizen’s benefit for children or the child allowance should be bundled there. It is considered the Greens’ prestige socio-political project.

Citizen’s money

Around 18 years after the introduction of Hartz IV (unemployment benefit II), citizens’ benefit will replace the previous regulations for the unemployed in Germany on January 1, 2023. At the start, the calculation was linked to current inflation. If this increases, there is more money for the recipients. That could change. For 2024, the recipients are threatened with a zero round.

Single people are currently entitled to 563 euros. Adults who live with a partner receive 506 euros. For young people aged 15 to under 18 there is 471 euros. Children from the age of 7 to the age of 14 receive 390 euros.

Pension contributions

With Pension Package II, the extended holding line will be removed. It currently stipulates that the contribution rate may not rise above 20 percent. The government is thus clearing the way for contribution increases. So far, employees and employers have had to pay a total of 18.6 percent into the pension fund.

In order to secure the financing of pensions, the government initially wants to draw on the pension insurance reserves and higher contributions. The contribution rate should remain stable at 18.6 percent until 2027. An increase to 20 percent is planned from 2028, which is expected to rise further to 22.3 percent by 2035. The federal government could bring forward these plans.

These figures are preliminary government estimates and may be adjusted depending on future developments. The contribution rate – currently 18.7 percent – is expected to rise to 21.1 percent by 2037 if politicians do not intervene.

Tax class combination III and V will be abolished

And the Federal Ministry of Finance is also planning massive changes to the tax brackets. The different tax classes (III and V) for married couples are to be abolished. Instead, there should only be one tax bracket.

So far, high earners have been taxed according to tax class III, low earners according to tax class V. While high earners pay less taxes and therefore have more in their account, the opposite is true for low earners. After submitting the tax return, money is usually given back by the tax authorities, depending on the amount of taxable income.

By abolishing tax classes III and V, low earners pay less taxes and higher earners pay more. The bottom line is that there should be no additional burden for the couple. However, calculations show that in some cases there is an additional burden. And the state benefits from this.

Elimination of subsidies

The Federal Ministry of Finance could also abolish the reduced tax rate for cultural goods. This would have massive consequences for the cultural industry, artists and also consumers. Similar to the catering industry, where the reduced tax rate for food was abolished at the beginning of the year, this would have an impact on prices in cinemas, theaters, concerts and museums. In the stadium, too, 19 percent would no longer be charged on tickets, but 7 percent.

The Federal Ministry of Finance could also significantly reduce all tax breaks for Sunday, public holiday and night surcharges. If the tax relief were to disappear, employees would have to pay tax on these additional income components, which would lead to a higher overall tax burden. The full tax rate would then be deducted from the surcharges, so that the employees’ net income would decrease. The result: Sunday, public holiday and night work could no longer be worthwhile for many people.

Germany ticket

It is unclear whether the Germany ticket will remain or will become significantly more expensive. According to the Regionalization Act, the federal government will pay 1.5 billion euros annually until 2025 – as will the states as a whole. There has been a heated debate over the distribution of costs in recent months. At the beginning of April, there was a funding gap of 350 million euros in the Deutschland Ticket. “The sales price of the Germany ticket is checked regularly,” says a key decision at a summit meeting of the federal states’ transport ministers. The federal government should contribute almost 1.5 billion euros by 2025 if the price remains at 49 euros. The remaining 1.5 billion comes from the municipalities.

Full tax rate for hotels?

A large German hotel chain is apparently already preparing for a tax shock in the hospitality industry. Accordingly, the Federal Ministry of Finance could initiate the abolition of the tax reduction for the hotel industry introduced in 2009. Hotels, holiday apartments and campsites would be affected. Anyone who books a hotel room in Germany currently pays seven percent VAT. The FDP campaigned for this adjustment. With the abolition of the tax privilege, travelers, commuters and hotel guests would no longer have to pay seven percent for overnight stays, but 19 percent.

Last year, the responsible ministry had calculated what the increase would bring. The higher tax rate would bring around 720 million euros into the state coffers. However, the numbers are based on the options paper from the previous year. At that time the aim was to balance the budget deficit in 2024.

Many people are still annoyed about rising food prices. But now discounters and supermarkets are slashing prices for many popular foods. Experts are assessing how this will affect weekly shopping and whether this will mark the end of inflation.

Anyone who pays a lot in cash is exposed to a certain health and hygiene risk. The Sparkasse points this out and urges caution. Because the means of payment in any form is always a haven for numerous bacteria and germs