Germany budget: Berlin halves its commitments to Ukraine

Berlin will halve its direct financial contributions to Kyiv as part of the 2025 German Federal Budget, which the German cabinet agreed on Wednesday.

Despite this move, Finance Minister Christian Lindner told the media that Ukraine's financing is secured "for the foreseeable future" thanks to $50 billion in loans that the G7 agreed can be taken from the proceeds of frozen Russian assets.

The budget laid out on Wednesday provides $4.38 billion in financial aid to Ukraine in 2025, down from $8.75 billion this year.‌

German governments have to operate under a self-imposed rule on government borrowing called the 'debt brake'. This rule limits government borrowing to 0.35 percent of GDP and is designed to stop the spiraling national debt seen in other countries.

There is also a $18.55 billion gap between what is earmarked for spending and what is included in the plan.

The 2025 financial plan includes $85.35 billion in investments, $47.93 billion in net borrowing and a total budget of $526.30 billion. Lindner says that sticking within the rules Berlin sets itself will aid the entire Eurozone.

"We are complying with the debt brake, which makes us an anchor of stability in Europe," he insisted.

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A major budget goal is to reinvigorate the still-stuttering three-party coalition government. Berlin has swayed between stagnation and recession for more fiscal quarters than expected. The conflict in Ukraine and recovery from COVID have all been blamed, but while other nations impacted by these same factors, like France and the UK, have seen some bounce back, Germany has not.

"With our growth initiative, we are providing important economic policy impetus to make Germany more attractive as a business location," said Lindner. "New room for maneuver in the budget can only be created through more economic growth."

Getting to a position where the coalition government agree on a budget has been challenging. Germany is currently a little over a year away from a federal election. All sides involved in the current cabinet have their eyes on that election, with little intention of coming together again in the same form. 

Olaf Scholz's Social Democratic Party currently heads the coalition, along with the Greens and Free Democrats. Internal disagreements between the parties, which have some polarized stances on key issues, have caused issues when it comes to finding a consensus on major issues, including financial ones.

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