German Draft

Budgetary Plan
2025

Staats
haus
German Draft
Budgetary Plan
2025
German Draft Budgetary Plan of the general government
(Federation, Länder, local authorities and social security
funds) in accordance with EU Regulation No 473/2013

October 2024
Contents
Public finances in Germany 5
Status of the projections 5
Forecast for public finances 5
Basis for the present Draft Budgetary Plan 2025 7

Tables:

Table 1: General government fiscal balance and debt-to-GDP ratio 6

Table 2: Growth in general government net expenditure 6
Table 3: Technical assumptions 8
Table 4a: Macroeconomic prospects 9
Table 4b: Price developments – deflators 9
Table 4c: Labour market developments 10
Table 4d: Sectoral balances 10
Table 5a: General government budgetary targets broken down by subsector 11
Table 5b: General government debt developments (Maastricht definition) 12
Table 5c: GDP sensitivity of the general government budget balance projection 12
Table 5d: Interest-rate sensitivity of the general government budget balance projection 12
Table 6: General government expenditure and revenue projections under the
no-policy-change scenario 13
Table 7: General government expenditure and revenue targets 14
Table 8: Discretionary measures at the general government level (including discretionary
measures at the federal level) 15
Table 9: Impact of the Recovery and Resilience Facility (RRF) on the projection – grants 16
Table 10: Net expenditure growth 17
Table 11: Implementation of the country-specific recommendations (CSRs) for 2024/2025 18
Table 12: Methodological aspects 34
 German Draft Budgetary Plan 2025

Public finances in Germany

Information on the Draft Budgetary Plan in accordance

with Regulation (EU) No 473/2013 of the European
Parliament and of the Council of 21 May 2013 and in
accordance with the related Code of Conduct

Status of the projections

could not be taken into account in the present
Germany’s 2025 draft budgetary plan presents Draft Budgetary Plan 2025. It will form the
the fiscal projections for the budgets of the basis of the next tax estimate, the results of
Federation, Länder, local authorities and social which are due to be issued on 24 October 2024.
security funds (including their off-budget These results will be taken into consideration
entities) on the basis of current trends and in the final parliamentary deliberations on the
planning. The projections take account of 2025 federal budget.
information up to 2 September 2024.
Forecast for public finances
An important source used as the basis for
making the fiscal projections is the govern- • Reduction of the general government deficit
ment draft of a supplementary federal budget According to the projection, the general
for 2024 of 17 July 2024. Another important government deficit will be 2½% of GDP in
source is the government draft of the Act 2024, roughly the same as in 2023, when the
Adopting the Federal Budget for the 2025 Fis- deficit was 2.6% of GDP. This can be attributed
cal Year and Fiscal Plan to 2028 (Gesetz über die to contrasting trends: On the one hand, the
Feststellung des Bundeshaushaltsplans für das expiry of the energy price brakes is easing
Haushaltsjahr 2025 und Finanzplan des Bundes the burden on public budgets, while on the
bis 2028), adopted by the federal government other hand, significant additional spending is
on 16 August 2024. planned for the special fund for the Bundes-
wehr and the Climate and Transformation
The federal government’s budgetary and Fund. The downturn in the economy in 2024
fiscal planning is based on the results of the compared with 2023 is also contributing to
Working Party on Tax Revenue Estimates of higher deficits.
16 May 2024, which, in turn, are based on the
federal government’s spring projection on • Structural deficit returning to normal
macroeconomic trends of 24 April 2024.
The reduction in the general government defi-
Once the federal government’s draft budget cit is also reflected in the structural balance
has been forwarded to the Bundestag and (i.e. the fiscal balance adjusted for cyclical and
Bundesrat, the executive branch’s respon- one-off effects), which in 2024 is projected
sibility for the budget preparation process to improve slightly in year-on-year terms to
ends, and the legislative branch takes over. around -1¾% of GDP. A further, significant
On 9 October 2024, while the parliamentary improvement to around -1% of GDP is forecast
deliberations were underway, the federal for 2025.
government published its autumn projection
on macroeconomic trends. This projection

5
German Draft Budgetary Plan 2025

General government fiscal balance and Table 1

debt-to-GDP ratio
2023 2024 2025
in % of GDP
Fiscal balance -2.6 -2½ -1¾
Structural balance -2.0 -1¾ -1
Debt-to-GDP ratio 62.91
63¼ 63¼
Figures for the projection years are rounded to quarter percentage points of GDP.
1 Maastricht debt-to-GDP ratio for 2023, as published by the Deutsche Bundesbank on 30 September 2024.

• Stabilisation of the debt ratio

net expenditure in 2023 was due to the relief
Based on the projection presented here, the and stabilisation measures taken during the
debt-to-GDP ratio will rise slightly in 2024 to energy price crisis.
around 63¼% of GDP and remain at that level
in 2025. Spending on financial transactions • Higher investments in areas that are crucial
has the effect of increasing the Maastricht for the future
debt-to-GDP ratio, but is not included when
calculating the Maastricht deficit. Investment levels have increased significantly
in recent years. In 2023, government gross
• Slowing growth in net expenditure fixed capital formation as defined in the
national accounts stood above pre-crisis levels
With the reform of the Stability and Growth at 2.8% of GDP (average in the 2010s: 2.5%
Pact, adopted in April 2024, growth in of GDP). A further increase, to around 3%, is
general government net expenditure replaced expected in 2025.
the structural balance as the primary fiscal
indicator. Net expenditure covers general However, private sector investments make
government spending, adjusted for interest up the lion’s share of aggregate investment
expenditure and discretionary revenue (around 90%). Private investments are
measures. Furthermore, net expenditure does supported by the federal government both
not include cyclical unemployment benefit through measures to establish more favoura-
expenditures, expenditures financed by the ble conditions for investment and by means of
EU or national expenditure on co-financing government investment grants. Government
of EU programmes. investment grants amounted to 1.5% of GDP
in 2023, significantly more than before the
Growth in net expenditure is likely to slow crisis (average in the 2010s: 0.7% of GDP). In
from 5.0% in 2023 to around 3¾% in 2024, 2024 and 2025, investment grants are likely to
and is projected to decline even further in exceed the 2023 level.
2025, to around 2¼%. The high growth rate in

Growth in general government net expenditure Table 2

2023 2024 2025

in % yoy
Net expenditure growth rate 5.0 3¾ 2¼
Figures for the projection years are rounded to quarter percentage points of GDP.

6
 German Draft Budgetary Plan 2025

Basis for the present Draft › Government draft of an Act to Stabilise

Pension Levels and to Create a “Generation-
Budgetary Plan 2025 al Capital Fund” for the Statutory Pension
Insurance System (Gesetz zur Stabilisierung
The Draft Budgetary Plan 2025 is based in
des Rentenniveaus und zum Aufbau eines
particular on the following sources and
Generationenkapitals für die gesetzliche
information:
Rentenversicherung) of 29 May 2024
• Macroeconomic basis › Government draft of the 2024 Annual Tax
Act (Jahressteuergesetz 2024) of 5 June 2024
› Federal government spring projection of
24 April 2024 › Government draft of a Fourth Act to
Reduce Bureaucracy for Citizens, Business-
› Results relating to the general government
es and the Public Administration (Viertes
budget in the national accounts, published
Gesetz zur Entlastung von Bürgerinnen
by the Federal Statistical Office on
und Bürgern, der Wirtschaft sowie der
27 August 2024
Verwaltung von Bürokratie) of 19 June 2024
• Results of the Working Party on Tax
› Postal Legislation Modernisation Act
Revenue Estimates of 16 May 2024
(Gesetz zur Modernisierung des Postrechts) of
• Budgetary plans 15 July 2024
› Act Adopting the Federal Budget for the › Government draft of a Budget Support Act
2024 Fiscal Year (Gesetz über die Feststellung (Haushaltsbegleitgesetz) of 17 July 2024
des Bundeshaushaltsplans für das Haushalts-
› Twenty-Ninth Act Amending the Federal
jahr 2024) of 10 February 2024
Training Assistance Act (Neunundzwan-
› Government draft of a supplementary zigstes Gesetz zur Änderung des Bundesaus-
federal budget for 2024 of 17 July 2024 bildungsförderungsgesetzes) of 19 July 2024
› Government draft of the Act Adopting › Government draft of an Act to Further
the Federal Budget for the 2025 Fiscal Year Develop Tax Law and Adjust the Income
and Fiscal Plan to 2028 (Gesetz über die Tax Schedule (Gesetz zur Fortentwicklung
Feststellung des Bundeshaushaltsplans für des Steuerrechts und zur Anpassung des
das Haushaltsjahr 2025 und Finanzplan des Einkommensteuertarifs) of 24 July 2024
Bundes bis 2028), adopted by the federal
› Government draft of an Act on the Tax
government on 16 August 2024
Exemption of the 2024 Subsistence Income
› Economic and fiscal plan of the special (Gesetz zur steuerlichen Freistellung des
Climate and Transformation Fund, adopted Existenzminimums 2024) of 24 July 2024
by the federal government on 16 August 2024
› Act Amending the Fiscal Equalisation Act
• Other legislation and measures, in and the Stability Council Act (Gesetz zur
chronological order Änderung des Finanzausgleichsgesetzes und
› 2024 Budget Financing Act (Haushaltsfinan- zur Änderung des Stabilitätsratsgesetzes) of
zierungsgesetz 2024) of 22 December 2023 30 July 2024

› Second 2024 Budget Financing Act (Zweites › Government draft of an Act on Accru-
Haushaltsfinanzierungsgesetz 2024) of al-based Accounting of Interest Expend-
27 March 2024 iture in the Context of Government Bor-
rowing and a Third Act to Improve Quality
› Act to Enhance Growth Opportunities,
and Participation in Child Day Care (Gesetz
Investment, and Innovation and to Simplify
zur periodengerechten Veranschlagung von
the Tax System and Increase Tax Fairness
Zinsausgaben im Rahmen der staatlichen
(Gesetz zur Stärkung von Wachstumschan-
Kreditaufnahme und eines Dritten Gesetzes
cen, Investitionen und Innovation sowie
zur Weiterentwicklung der Qualität und zur
Steuervereinfachung und Steuerfairness) of
Teilhabe in der Kindertagesbetreuung) of
27 March 2024
15 August 2024

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German Draft Budgetary Plan 2025

Technical assumptions Table 3

2023 2024 2025

Short-term interest rate (annual average in %) 3.9 4.0 2.9

Long-term interest rate (annual average in %) 2.4 2.3 2.2

USD/€ exchange rate (annual average) 1.08 1.09 1.09

Nominal effective exchange rate 110.7 111.7 109.5

World GDP growth rate (excluding EU) 3.6 3.5 3.5

EU GDP growth rate 0.6 1.1 1.8

Growth of German sales markets (% change yoy) 1

0 2¾ 3¼

World import volumes (excluding EU) 0.5 2.9 3.0

Oil price (Brent, USD/barrel) 82 86 81

2024 and 2025: federal government spring projection on macroeconomic trends, April 2024.
1 Figures for the projection period are rounded to quarter percentage points.

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 German Draft Budgetary Plan 2025

Macroeconomic prospects Table 4a

2023 2023 2024 2025

ESA
code
€ billion Year-on-year change in %

1. Real GDP B1*g 3,615.5 -0.3 0.3 1.0

2. Potential GDP1 B1*g 3,654.3 0.9 0.6 0.6

contributions (percentage points):

- labour 0.4 0.2 0.1

- capital 0.3 0.3 0.3
- total factor productivity 0.1 0.1 0.2

3. Nominal GDP B1*g 4,185.6 5.9 3.0 2.8

Index
Components of real GDP Year-on-year change in %
(2020=100)

4. Private final consumption expenditure2 P.3 107.6 -0.4 0.9 1.0

5. Government final consumption expenditure P.3 103.4 -0.1 0.7 0.9

6. Gross fixed capital formation P.51g 99.2 -1.2 -0.8 1.7

7. Changes in inventories and net acquisition of valuables P.52 +

- 0.1 -0.2 0.0
(% of GDP) P.53

8. Exports of goods and services P.6 113.0 -0.3 -0.6 3.1

9. Imports of goods and services P.7 115.9 -0.6 -0.6 3.6

Contributions to real GDP growth in percentage points

10. Final domestic demand (excluding inventories) - -0.4 0.5 1.1

P.52 +
11. Changes in inventories and net acquisition of valuables - 0.1 -0.2 0.0
P.53

12. External balance of goods and services B.11 - 0.1 0.0 -0.1

2023: Federal Statistical Office, August 2024.

2024 and 2025: federal government spring projection on macroeconomic trends, April 2024.
1 2023 figure calculated as the difference between GDP (August 2024) and output gap (April 2024).
2 Including private non-profit organisations serving households.

Price developments – deflators Table 4b

2023 2023 2024 2025

Index
Year-on-year change in %
(2020=100)
1. GDP 115.8 6.1 2.8 1.8

2. Private consumption expenditure1 117.2 6.7 2.5 2.0

3. Government consumption expenditure 113.8 4.2 4.7 1.9

4. Gross investment 118.3 0.4 0.3 1.6

5. Exports 119.0 0.7 0.7 1.2

6. Imports 122.0 -3.0 -0.2 1.4

2023: Federal Statistical Office, August 2024.

2024 and 2025: federal government spring projection on macroeconomic trends, April 2024.
1 Including private non-profit organisations serving households.

9
German Draft Budgetary Plan 2025

Labour market developments Table 4c

2023 2023 2024 2025

ESA
code
Level Year-on-year change in %

1. Employment, persons1 (in millions) 46.0 0.7 0.4 0.1

2. Employment, hours worked2 (in billions) 61.4 0.4 1.0 0.5

3. Unemployment rate3 (%) - 2.8 3.0 2.8

4. Labour productivity, persons4 102.4 -1.0 -0.1 0.9

5. Labour productivity, hours worked5 100.8 -0.6 -0.7 0.5

6. Compensation of employees (€ billion, domestic) D.1 2,223.6 6.8 5.5 3.7

7. Compensation per employee (€ thousand, domestic) 52.7 5.8 4.9 3.5

2023: Federal Statistical Office, August 2024.

2024 and 2025: federal government spring projection on macroeconomic trends, April 2024.
1 Occupied population, domestic concept, national accounts definition.
2 National accounts definition.
3 Unemployed (ILO) / economically active population.
4 Real GDP per person employed (domestic); 2020=100.
5 Real GDP per hour worked; 2020=100.

Sectoral balances Table 4d

2023 2024 2025

ESA
code
in % of GDP

1. Net lending/borrowing vis-à-vis the rest of the world B.9 5.8 7.1 6.9

of which:
- Balance of goods and services 4.0 4.4 4.2

- Balance of primary incomes and transfers 2.2 3.2 3.2

- Capital account -0.4 -0.5 -0.5

2. Net lending/net borrowing of households B.9 5.9 6.2 6.3

3. Net lending/net borrowing of general government1 B.9 -2.6 -2½ -1¾

4. Statistical discrepancy - - -

2023: Federal Statistical Office, August 2024.

2024 and 2025: federal government spring projection on macroeconomic trends, April 2024.
1 Figures for the projection period are rounded to quarter percentage points of GDP.

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 German Draft Budgetary Plan 2025

General government budgetary targets Table 5a

broken down by subsector

2024 2025
ESA
code
in % of GDP

Net lending (+) / net borrowing (-) (B.9) by subsector1

1. General government S. 13 -2½ -1¾

2. Central government S. 1311 -2 -1

3. State government S. 1312 -¼ 0

4. Local government S. 1313 -¼ -¼

5. Social security funds S. 1314 0 -¼

General government (S.13)

6. Interest expenditure D.41 1 1

7. Primary balance2 -1½ -¾

8. One-off and other temporary measures 3

0 0

9. Real GDP growth (% change yoy) 0.3 1.0

10. Potential GDP growth (% change yoy) 0.6 0.6

contributions (percentage points):
- labour 0.2 0.1
- capital 0.3 0.3
- total factor productivity 0.1 0.2
in % of potential GDP

11. Output gap -1.5 -1.1

12. Cyclical budgetary component -¾ -½

13. Cyclically adjusted balance (1-12) -1¾ -1

14. Cyclically adjusted primary balance (13+6) -¾ 0

15. Structural fiscal balance (13-8) -1¾ -1

1 TR - TE = B.9.
2 The primary balance is calculated as (B.9, item 1) plus (D.41, item 6).
3 A plus sign means deficit-reducing one-off measures.
Figures for the projection period are rounded to quarter percentage points of GDP.
Any discrepancies in totals are due to rounding.

11
German Draft Budgetary Plan 2025

General government debt developments Table 5b

(Maastricht definition)
2024 2025
ESA
code
in % of GDP

1. Gross debt 63¼ 63¼

2. Change in gross debt ratio ½ -¼

Contributions to changes in gross debt

3. Primary balance 1½ ¾

4. Interest expenditure D.41 1 1

5. Stock-flow adjustment -2 -1¾

p.m.: 1½ 1½
Implicit interest rate on debt1
Figures for the projection period are rounded to quarter percentage points of GDP.
Any discrepancies in totals are due to rounding.
1 Proxied by interest expenditure divided by the debt level of the previous year.

GDP sensitivity of the general government Table 5c

budget balance projection

2023 2024 2025

General government budget balance

GDP trends according to
in % of GDP
- Baseline scenario -2.6 -2½ -1¾

- Alternative scenarios

Real GDP, rate of change -½ percentage point p.a. compared with baseline scenario -2¾ -2¼

Real GDP, rate of change +½ percentage point p.a. compared with baseline scenario -2¼ -1¼
Figures for the projection period are rounded to quarter percentage points of GDP.

Interest rate sensitivity of the general Table 5d

government budget balance projection

2023 2024 2025

General government budget balance

Interest rate trends according to
in % of GDP
- Baseline scenario -2.6 -2½ -1¾

- Alternative scenarios

Interest rate +50 basis points p.a. compared with baseline scenario -2½ -1¾

Interest rate -50 basis points p.a. compared with baseline scenario -2¼ -1½
Figures for the projection period are rounded to quarter percentage points of GDP.

12
 German Draft Budgetary Plan 2025

General government expenditure and revenue Table 6

projections under the no-policy-change scenario*

2024 2025
ESA
General government (S.13)
code
in % of GDP

1. Total revenue at unchanged policies* TR 46¾ 47¾

of which:
1.1 Taxes on production and imports D.2 10½ 10½
1.2 Current taxes on income, wealth, etc. D.5 12¾ 13¼
1.3 Capital taxes D.91 ¼ ¼
1.4 Social contributions D.61 17½ 18
1.5 Property income D.4 ¾ ¾
1.6 Other1 5 5
p.m.: Tax burden
41 42
(D.2+D.5+D.61+D.91-D.995)2

2. Total expenditure at unchanged policies* TE3 49¼ 49¼

of which:
2.1 Compensation of employees D.1 8¼ 8¼
2.2 Intermediate consumption P.2 6½ 6¼
2.3 Social payments D.62 + D.632 25¼ 25¾
of which: Unemployment benefits4 1½ 1½
2.4 Interest expenditure D.41 1 1
2.5 Subsidies D.3 1¼ 1
2.6 Gross fixed capital formation P.51 3¼ 3¼
2.7 Capital transfers D.9 2 1¾
2.8 Other5
2 2
* The projections under the no-policy change scenario represent the anticipated revenue and expenditure excluding the discretionary
measures shown in Table 8.
1 P.11 + P.12 + P.131 + D.39rec + D.7rec + D.9rec (other than D.91rec).
2 Including those collected by the EU and including an adjustment for uncollected taxes and social contributions (D.995), if appropriate.
3 TR - TE = B.9.
4 Includes social benefits other than social transfers in kind (D.62) and social transfers in kind via market producers (D.632) related to
unemployment benefits.
5 D.29pay + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.52 + P.53 + NP + D.8.
Figures for the projection period are rounded to quarter percentage points of GDP.
Any discrepancies in totals are due to rounding.

13
German Draft Budgetary Plan 2025

General government expenditure and revenue targets Table 7

2024 2025
ESA
General government (S.13)
code
in % of GDP

1. Total revenue target TR 46¾ 47½

of which:
1.1 Taxes on production and imports D.2 10½ 10½
1.2 Current taxes on income, wealth, etc. D.5 12¾ 13
1.3 Capital taxes D.91 ¼ ¼
1.4 Social contributions D.61 17½ 18
1.5 Property income D.4 ¾ ¾
1.6 Other1
5 5
p.m.: Tax burden
41 41¾
(D.2+D.5+D.61+D.91-D.995)2

2. Total expenditure target TE3 49¼ 49¼

of which:
2.1 Compensation of employees D.1 8¼ 8¼
2.2 Intermediate consumption P.2 6½ 6¼
2.3 Social payments D.62 + D.632 25 25½
of which: Unemployment benefits4 1½ 1½
2.4 Interest expenditure D.41 1 1
2.5 Subsidies D.3 1¼ 1¼
2.6 Gross fixed capital formation P.51 3 3¼
2.7 Capital transfers D.9 2¼ 1¾
2.8 Other5
2 2
1 P.11 + P.12 + P.131 + D.39rec + D.7rec + D.9rec (other than D.91rec).
2 Including those collected by the EU and including an adjustment for uncollected taxes and social contributions (D.995), if appropriate.
3 TR - TE = B.9.
4 Includes social benefits other than social transfers in kind (D.62) and social transfers in kind via market producers (D.632) related to
unemployment benefits.
5 D.29pay + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.52 + P.53 + NP + D.8.
Figures for the projection period are rounded to quarter percentage points of GDP.
Any discrepancies in totals are due to rounding.

14
 German Draft Budgetary Plan 2025

Discretionary measures at the general government level Table 8

(including discretionary measures at the federal level)

ESA Adoption status / entry into 2024 2025
List of new measures* Detailed description
code force
in % of GDP
Enhancing security, defence and Support for Ukraine in the form of D.92 1 January 2024 / 1 January 2025 -0.08
stability in partner countries1 military equipment, replacement
– here: changes compared with of Bundeswehr materials that
the 2024 government draft were provided to Ukraine, German
contributions to the European
Peace Facility (EPF), bilateral
capacity-building projects
Federal government Abolition of the citizen’s benefit D.62, Different provisions enter into 0.12 0.13
package for future-proof bonus, expansion of the “job D.21, force on different dates
finances, social security and turbo” initiative for labour market D.74
investments in the future2 integration, reduction of expenditures
of various ministries, increase of tax
rates in aviation, gradual phasing-out
of diesel subsidies, adjustment of
basic income support for jobseekers
Federal government electricity Cut in electricity duty for D.21, Different provisions enter into -0.11 -0.11
price package for energy- manufacturing companies to D.31 force on different dates
intensive companies3 the lowest rate permitted by the
European Union, continuation
of supplementary aid (super
cap) and expansion of electricity
price compensation
Creation of a capital stock Creation of a “generational capital F.51 With the implementation -0.28 -0.28
to stabilise the rise of fund” to bolster the statutory of the legislation for the
contributions in the statutory pension insurance system generational capital fund
pension insurance system using capital market yields
(pension reserve fund)4
Government draft of an Act on Increase in the basic personal D.51 -0.08
the Tax Exemption of the 2024 allowance integrated into the
Subsistence Income (Gesetz income tax schedule and in the
zur steuerlichen Freistellung tax allowance for children for
des Existenzminimums 2024)5 the 2024 assessment period
Government draft of an Act Adjustment of the income tax D.51 Different provisions enter into -0.17
to Further Develop Tax Law schedule, replacement of the force on different dates
and Adjust Income Tax Rates combination of tax classes III and
(Gesetz zur Fortentwicklung des V with the factor-based method,
Steuerrechts und zur Anpassung reform of collective depreciation
des Einkommensteuertarifs)6 rules, continuation of depreciation
options for moveable assets for
the period 2025 to 2028, increase
in child benefit, increase in the
immediate supplement for children
*Compared with the Finance Ministry forecast of October 2023. A minus sign indicates additional expenditure or revenue shortfalls in
the general government budget.
1 For details of the federal budget 2024 and 2025 (in German), please see: https://www.bundesfinanzministerium.de/Web/DE/Themen/
Oeffentliche_Finanzen/Bundeshaushalt/bundeshaushalt.html
2 For details (in German), please see: https://www.bundesfinanzministerium.de/Monatsberichte/2024/01/Inhalte/Kapitel-2a-
Schlaglicht/schlaglicht-bundeshaushalt-2024.html
3 For details (in German), please see: https://www.bundesregierung.de/breg-de/aktuelles/strompreispaket-energieintensive-
unternehmen-2235760
4 No effect on the deficit. For details (in German), please see: https://www.bundesfinanzministerium.de/Web/DE/Themen/
Internationales_Finanzmarkt/Altersvorsorge/Generationenkapital/generationenkapital.html
5 For details (in German), please see: https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/
Abteilungen/Abteilung_IV/20_Legislaturperiode/2024-07-24-Freistellung-Existenzminimum/0-Gesetz.html
6 For details (in German), please see: https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/
Abteilungen/Abteilung_IV/20_Legislaturperiode/2024-07-20-JStG-II-2024/0-Gesetz.html

15
German Draft Budgetary Plan 2025

Impact of the Recovery and Resilience Facility Table 9

(RRF) on the projection – grants

2020 2021 2022 2023 2024 2025 2026

Revenue from RRF grants (in % of GDP)

RRF grants as included in the revenue projections 0.00 0.17 0.10 0.07 0.11 0.11 0.10

Cash disbursements of RRF grants from EU 0.00 0.06 0.00 0.10 0.30 0.09 0.09

Expenditure financed by RRF grants (in % of GDP)

Total current expenditure 0.00 0.11 0.05 0.04 0.02 0.02 0.01

Gross fixed capital formation (P.51g) 0.01 0.00 0.00 0.00 0.00 0.00 0.00

Capital transfers (D.9) 0.00 0.05 0.05 0.03 0.08 0.09 0.09

Investment expenditure 0.02 0.05 0.05 0.03 0.08 0.09 0.09

Other costs financed by RRF grants (in % of GDP)

Reduction in tax revenue 0.00 0.00 0.00 0.00 0.00 0.01 0.01

Other costs with impact on revenue 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Financial transactions
Any discrepancies are due to rounding.

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 German Draft Budgetary Plan 2025

Net expenditure growth Table 10

2023 2023 2024 2025

ESA
code
€ billion in % of GDP

1. Total expenditure TE 2,025.0 48.4 49¼ 49¼

2. Interest expenditure D.41 36.6 0.9 1 1

3. Cyclical unemployment benefit expenditure -0.3 0.0 0 0

4. Expenditure on EU programmes fully matched by EU

9.6 0.2 ¼ ¼
funds revenue

4a. of which : Investment expenditure 4.4 0.1 0 0

5. National co-financing of EU programmes 2.7 0.1 0 0

6. One-off expenditure (excl. EU-financed measures) 0.0 0.0 0 0

7. Nationally financed net primary expenditure (before

1,976.4 47.2 48 48
DRM) (= 1-2-3-4-5-6)

8. Discretionary revenue measures (DRM) ¼ ¼

9. Nationally financed net primary expenditure (after DRM)

47½ 47¾
(= 7-8)

Year-on-year change

10. Nominal GDP growth 3 2¾

11. Primary expenditure growth 3¾ 2¼

Figures for the projection period are rounded to quarter percentage points of GDP.
Any discrepancies in totals are due to rounding.

17
18
Implementation of the country-specific recommendations Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
1.11 Submit the medium-term fiscal- Legal requirement Each member state must submit a national medium-term fiscal-structural Based on Article 36 of Regulation
structural plan in a timely manner. pursuant to Article plan to the Council and to the Commission. The national medium-term (EU) 2024/1263 on the preventive
German Draft Budgetary Plan 2025

11 of Regulation (EU) fiscal-structural plans contain the fiscal, reform and investment commitments arm of the reformed Stability
2024/1263 on the of a member state, covering a period of four or five years depending on and Growth Pact (SGP), the
preventive arm of the the regular length of the legislative term of that member state. federal government will submit
reformed Stability and the German FSP in consultation
Growth Pact (SGP) with the European Commission
regarding the date of submission.
1.2 In line with the requirements of the Limiting growth in Net spending is set to increase by approximately 2¼% on the year in 2025. The planned Draft Budgetary Plan projection
reformed Stability and Growth Pact, net expenditure growth in net spending is thus substantially below the growth in the years prior. of 15 October 2024
limit the growth in net expenditure in
2025 to a rate consistent with putting
the general government debt on a
plausibly downward trajectory over
the medium term and maintaining the
general government deficit below the
3% of GDP Treaty reference value.
1.3 Strengthen public investment Accelerated For movable assets acquired or produced after 31 December 2024 and Implementation via the
and remove obstacles to private depreciation options before 1 January 2029, taxpayers will be able to opt for accelerated Tax Law Development Act
investment to boost competitiveness. depreciation instead of straight-line depreciation. The percentage that (Steuerfortentwicklungsgesetz);
can be applied is up to two and a half times the percentage that would be parliamentary procedure ongoing
permissible under straight-line depreciation, up to a maximum of 25%.
Extending and expanding accelerated depreciation options can contribute to
combating the sustained economic slump and overcoming Germany’s far-
reaching structural problems as a business location. It will create a strong
and broad-based economic stimulus, accelerate lending and incentivise
innovative investments that contribute to structural development.
Collective depreciation The lower threshold for asset pools will be raised to €800 and the upper limit Implementation via the
to €5,000. The liquidation period for asset pools will be reduced to three years. Tax Law Development Act
In addition, the exclusivity requirement between the provision applicable to (Steuerfortentwicklungsgesetz);
low-value assets and the option of creating an asset pool will be abolished. parliamentary procedure ongoing
These changes will apply for the first time to assets acquired, produced or
invested in business assets in fiscal years beginning after 31 December 2024.
1 The CSRs have been subdivided for reasons of clarity; the subdivisions are not part of the official CSRs.
 Continuation Table 11
Implementation of the country-specific recommendations
(CSRs) for 2024/2025 – as at 30 September 2024
The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
In addition, record-keeping and documentation requirements for
low-value assets will be abolished. These requirements will apply for
the last time to fiscal years ending before 1 January 2025.
The measure is designed to promote investment.

Research allowance The tax incentive for research and development (research allowance) is intended to Implementation via the
strengthen Germany as a business location. In particular, it is designed to encourage small Tax Law Development Act
and medium-sized businesses to invest more in research and development activities. (Steuerfortentwicklungsgesetz);
parliamentary procedure ongoing
To further enhance the attractiveness of the research allowance for large companies,
the maximum assessment basis will be increased to €12 million. This will apply to
eligible expenditures incurred after 31 December 2024. The main objective is to create
an incentive for larger companies to invest even more in research and development.
KfW toolbox: federal KfW will receive a federal guarantee to enable it to finance large-scale The federal government is
guarantees sureties/guarantees for manufacturers of key technologies. This currently in the advanced
will support the ramp-up of the energy transition. stages of evaluation.

Revision of the With its amendments to the Federal Building Code, the federal government is The cabinet approved the
Federal Building Code accelerating the construction of housing, especially in high-demand metropolitan reform of the Federal Building
(Baugesetzbuch) areas. This forms part of the government’s efforts to implement its growth Code on 4 September 2024. The
strategy. Key changes include simplifications for building extensions, for the parliamentary deliberations are to
repurposing of commercial real estate and for the concentration of residential be completed by the end of 2024.
buildings as well as stronger pre-emption rights for local authorities.
Revision of the The revised Federal Building Code establishes digital notifications as the
Federal Building general rule. This will enable the development plan process to be completed
Code: digitalisation digitally. In addition, XPlanung, a planning standard that is already established
under Länder law, is also being enshrined in the Federal Building Code.

19
German Draft Budgetary Plan 2025
20
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
Revision of the The procedure for drawing up development plans is being accelerated. In future,
Federal Building Code: development plans will be announced within twelve months of completion of the
German Draft Budgetary Plan 2025

development plans participation procedure. The scope of what is known as the “simplified procedure” will
be extended to include the possibility of updating existing development plans to the
current status of the Land Use Ordinance (Baunutzungsverordnung) (“innovation clause”).
Revision of the A new general clause in planning law permits deviations from otherwise applicable
Federal Building Code: planning rules, including existing development plans, for a limited period for the
innovation clause purpose of creating housing. To ensure compliance with EU provisions, respect
local authorities’ responsibility for matters of planning, and avoid undesirable urban
planning developments, the general clause is subject to several specific restrictions.
Draft of the Building The Building Type E Act is intended to simplify basic and innovative construction Consultations with the Länder and
Type E Act (Gebäudetyp in Germany. It applies to new construction and refurbishment projects in associations have been completed.
E-Gesetz) which certain comfort standards – but not safety standards! – can be dispensed The plan is to present the draft
with. Type E will not be established as a separate category of buildings. act to the cabinet for approval as
soon as possible following the
final interministerial consultation.
Programme for The KNN programme focuses on construction projects for new residential and The programme is slated to
climate-friendly new non-residential buildings. The aim is to construct climate-friendly residential start on 1 October 2024 and
construction in the buildings that have lower greenhouse gas emissions over their lifecycles finish on 31 December 2025.
low-cost segment (KNN) as well as a space-optimised design involving lower lifecycle costs.
AI data processing The federal government wants to continue to improve general conditions for data The Federal Ministry for
centres: general processing centres, e.g. through accelerated approval procedures as well as easier Economic Affairs and Climate
conditions and quicker connections to the electricity grid. The latter includes non-binding Action is currently reviewing
online information from grid operators about available grid connection capacities. the planned measures.
The pending revision of
the Energy Industry Act
(Energiewirtschaftsgesetz)
contains provisions on the
acceleration, simplification and
digitalisation of grid connections.
AI data processing The federal government is making considerable efforts to expand high- The AI Action Plan of the
centres: high- performance computing (HPC) capacities in the research sector and to make Federal Ministry of Education
performance computing these available to the business community, especially SMEs and startups. and Research contains several
measures, including:
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
• Opening the supercomputing
capacities of the Gauss
Centre for Supercomputing
to commercial applications,
including for SMEs and startups
• Putting exascale-class HPC
systems into operation
• Creating broad-based
access to AI-specific
computer infrastructure
via AI service centres
• Putting a European AI
service centre into operation
on 1 January 2025
AI data processing The federal government plans to take appropriate measures to strengthen providers in To achieve this, the public
centres: digital Germany, not least in the interest of digital sovereignty of administration and business. administration will become an
sovereignty “anchor client” for sovereign
AI data processing centres.
The development of the necessary
structures is currently underway.
For example, interministerial
working structures are being
created in order to identify
and pool joint AI server
capacity requirements.
Ambitious In December 2023, the federal government adopted a National Pharma The federal government has
implementation Strategy containing more than 40 individual measures, including the already implemented many
of the National acceleration and simplification of clinical drug trials, steps to strengthen of the relevant measures, e.g.
Pharma Strategy approval authorities, and easier access to health data for research via the Medical Research Act
institutions. The aim is to improve general conditions and make Germany (Medizinforschungsgesetz) and
the Act on the Use of Health Data

21
German Draft Budgetary Plan 2025

internationally competitive as a location for pharmaceutical companies.

(Gesundheitsdatennutzungsgesetz).
22
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
Annual Bureaucracy Cutting red tape can enhance Germany’s attractiveness as a business All measures have already been
Reduction Act location, leading to higher economic growth and budget revenues. launched; implementation
German Draft Budgetary Plan 2025

(Bürokratieentlastungs- is thus underway.

gesetz), including The federal government is defining a burden reduction path. In future,
it will present a Bureaucracy Reduction Act each year which will ensure
• Reality checks that the burden imposed in that year by the entirety of federal laws
diminishes, also taking into account newly imposed regulations.
• Reduction of docu-
mentation and re- The corresponding proposals will be generated through the following measures:
porting requirements
• Reality checks will be introduced in all ministries, leading
• Online bureaucracy to specific bureaucracy reduction measures.
reduction portal
• All the ministries across the federal government will commit to a rigorous
reduction of documentation and reporting requirements in their own portfolios,
with reduction targets and time paths that can be clearly monitored.
• The federal government will set up an online bureaucracy reduction portal.
This will give businesses, citizens and the administration itself a permanent
channel through which they can propose specific measures to cut red tape.
If the National Regulatory Control Council supports a proposal, any rejection
on the part of the federal government will require special justification.
Act on Corporate Due The Corporate Sustainability Due Diligence Directive (CSDDD) entered into Under the growth strategy adopted
Diligence Obligations force on 25 July 2024. The CSDDD includes due diligence obligations relating to by the federal government on
in Supply Chains both human/employee rights and the environment, as well as the obligation to 17 July 2024, the Directive will be
(Lieferkettensorg- adopt a transition plan for climate change mitigation. The aim is to ensure that transposed in the current legislative
faltspflichtengesetz) companies in the EU fulfil certain due diligence obligations in order to avoid term by means of an amendment
adverse human rights and environmental impacts arising from their chains of to the Act on Corporate Due
business activities within Europe and elsewhere. The CSDDD is very similar in key Diligence Obligations in Supply
areas to the German Act on Corporate Due Diligence Obligations in Supply Chains. Chains. The details are currently
As a result, German companies are already well-prepared for the CSDDD. being developed in a ministry
draft under the leadership
of the Federal Ministry of
Labour and Social Affairs.
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
CSRD Implementation This law transposes the EU’s Corporate Sustainability Reporting Directive (CSRD). The government draft was adopted
Act (CSRD- The aim is to give investors, consumers and other stakeholders the information they on 24 July. The parliamentary
Umsetzungsgesetz) need to better assess companies’ contributions to sustainability efforts. To this end, procedure is expected to be
companies that are treated for accounting purposes as large companies and publicly concluded by the end of 2024.
traded companies that are treated for accounting purposes as small or medium-sized
companies will be required under trade law to publish a sustainability report as part
of their management report and to ensure that the sustainability report is audited.
Tax simplifications On 12 July 2024, the Federal Ministry of Finance received the reports of the Classification of viable measures
expert commissions on “citizen-oriented income tax” and “simplified corporate according to anticipated
taxation”. In particular, these reports outlined simplification potential and possible implementation time
ways of improving the competitiveness and system equity of income tax and
corporate tax legislation. The federal government, under the leadership of the
Federal Ministry of Finance, is currently reviewing whether the proposals are
viable and how long their implementation would take. The question of which
proposals can be implemented in the short or longer term will be key.
Simplification of In a comprehensive reform of national procurement law, public procurement procedures The draft legislation for the
procurement law and will be simplified, accelerated and digitalised. The aim is to achieve substantial relief for procurement transformation
enhanced compliance public administration and companies by cutting red tape and simplifying procedures, package is to be adopted by
with collective thus boosting public investment capacity and competition for public contracts. The the federal cabinet in the
agreements reform will also give public procurement a more strategic focus, make sustainable second half of 2024.
procurement more binding and strengthen SMEs, startups and innovative capacity.
The interministerial coordination
A draft Federal Act on Compliance with Collective Agreements (Bundestariftreuegesetz) process for the draft Act on
will make the awarding of public contracts from the Federation contingent on the Compliance with Collective
provision of working conditions that are in line with sectoral collective agreements. Agreements, which contains
This will remove existing competitive disadvantages for companies that are bound by the federal rules on compliance
collective agreements, thus strengthening collective bargaining coverage overall. with collective agreements, was
initiated on 9 September 2024.
Germany as a financial Various regulatory and supervisory measures will be taken in order The ministry draft was published
centre: venture capital to help strengthen Germany as a financial centre, thus mobilising the on 27 August; the Länder and
investments (Financing necessary capital for the transformation of our economy. associations had the opportunity
for the Future Act to comment until 13 September.
II (Zukunftsfinan-

23
German Draft Budgetary Plan 2025

zierungsgesetz II))
24
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
Based on the “Growth and Innovation Capital for Germany” (WIN) initiative, The government draft is to
the draft of the second Financing for the Future Act contains the following be presented by the end of
German Draft Budgetary Plan 2025

proposals aimed at simplifying venture capital investments: autumn so that the Bundesrat
and the Bundestag can consider
• Changes to the taxation of investments in commercial it in late 2024/early 2025. The
partnerships by funds that are covered by the Investment Tax Act new law is to enter into force
(Investmentsteuergesetz), including venture capital funds in the first half of 2025.
• Changes to the taxation of profits from sales of holdings
in corporations when these are reinvested
• Option of producing English-language prospectuses plus a summary
The draft also contains various other proposed measures designed to improve general
conditions for the financial sector, such as relaxing protection against dismissal for very
high earners in the financial sector and cutting red tape in supervisory processes.
Acceleration of The “Growth and Innovation Capital for Germany” (WIN) initiative is one element of the The WIN initiative has mobilised
the Future Fund: federal government’s efforts towards a greater mobilisation of private venture capital. private investment totalling
WIN initiative The aim is to boost the impact of the Future Fund as it develops according to plan. In approximately €12 billion of
consultation with KfW, the federal government will invest up to growth and innovation capital.
€500 million of resources from the Future Fund ahead of schedule in the next two
to three years, in addition to the existing cashflow planning. This will be done while
adhering to the existing management cost framework for the Future Fund.
Future Fund: direct The Future Fund’s direct holdings module is to enter the market by the end of 2024. The Efforts are currently being made
holdings module direct holdings module is intended to address the financing gap, particularly in large- to ensure that the Future Fund’s
scale financing rounds, for startups that already form part of the fund portfolio of KfW direct holdings module can enter
Capital and operate in strategically important areas of innovation and transformation. the market by the end of 2024.

Stronger exit channels The European Tech Champions Initiative (ETCI), which was launched in 2023, is The EIB Group is taking the lead
for scale-ups successfully improving the financing options available to young companies in the growth in the development of solutions
phase (scale-ups). However, there are not enough European prospects for follow-up that will improve the exit
financing. As a result, the growth of innovative companies in Europe is restricted, or these financing of scale-ups. The federal
companies relocate abroad due to better opportunities to obtain finance. The federal government has already contributed
government is pushing for the development of solutions at the EU level under the lead proposals and remains in close
responsibility of the EIB Group in order to improve the exit financing of scale-ups. contact with the EIB Group.
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
Ordinance on General The ordinance will be revised in order to enable a more up-to-date relationship between Currently in the interministerial
Conditions for the district heating companies and their customers. Aspects such as climate action and coordination process. The
Supply of District digitalisation will be included explicitly. The updated ordinance can create investment Länder and associations have
Heating (Verordnung incentives for utility companies to expand and decarbonise district heating networks. already been consulted.
über Allgemeine
Bedingungen für
die Versorgung mit
Fernwärme)
Geothermal Energy This omnibus act will remove obstacles to the development of geothermal Adopted in the 112th cabinet
Acceleration Act energy as well as the expansion of heat pumps and heat storage. Approval meeting (4 September 2024),
(Geothermiebeschleu- procedures will be accelerated, simplified and digitalised in the future. currently undergoing the
nigungsgesetz) This will ease the burden on public budgets and the private sector. parliamentary procedure.

Carbon Storage The amendment of the Carbon Storage Act will enable carbon capture and Parliamentary procedure ongoing
Act (Kohlendioxid- storage (CCS) as well as carbon capture and utilisation (CCU) in Germany.
Speicherungsgesetz) This creates the legal basis for the application of CCS technologies in deep
geological layers as well as CCU on an industrial scale. The amendment will
boost competitiveness and incentivise investments by creating more options
to respond to increasing carbon prices while supporting climate targets.
1.4 Enhance the fiscal space for Making private The Federal Ministry of Finance is aiming to initiate a legislative procedure in 2024 The aim is to discuss this measure
productive spending including by pension provision on a fundamental reform of private pensions that are eligible for tax incentives. The within the federal cabinet before
reforming the financing side of more attractive recommendations of the private pension provision focus group are being incorporated. the end of autumn 2024.
the first pillar pension system.
In addition to a more flexible disbursement phase, competition will be enhanced and
transparency increased. Alongside guaranteed pension products, a retirement securities
account will also be eligible for support in the future. Given that the consultations
within the federal government have not yet been concluded, it is not possible at
the current time to make any statements about any reduction in tax revenue.
Occupational The Second Act to Strengthen Occupational Pensions (2. Betriebsrentenstärkungsgesetz) Adopted by the federal cabinet
pension schemes will strengthen occupational pensions by extensively opening up social partner models, on 18 September 2024.
enabling investments with higher yields, and improving support for low earners. The tax
improvements will cause revenue shortfalls of €155 million per year in the medium term.

25
German Draft Budgetary Plan 2025
26
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 1:
Submit FSP, achieve prudent fiscal Title of measure Description and direct relevance to target Status and timetable
position, increase investment
Pensions Package II The Pensions Package II includes a “generational capital fund” that aims to expand Adopted by the federal
(Rentenpaket II) the funding base for the statutory pension insurance system. In addition to federal cabinet on 29 May 2024.
German Draft Budgetary Plan 2025

pension contributions and federal payments, the statutory pension insurance system Currently going through the
will as a result also be financed in the long term through returns on a publicly managed parliamentary procedure.
capital stock. By financing part of the statutory system, the fund will help to mitigate
future increases in pension contribution rates. The Federal Ministry of Finance intends
to transfer assets and permanent allocations in the form of loans (2024: €12 billion,
2025 onwards: €12 billion plus 3% p.a.) to the generational capital fund foundation.
One of the shared objectives of these three initiatives (31, 31b and the generational
capital fund) is to make greater use of the opportunities presented by international
capital markets in order to safeguard the long-term sustainability of the pension system.
1.5 Improve the tax mix for more Income tax schedules The federal government has initiated several measures, including: additional Implementation via the Act on
inclusive growth and sustainable for 2024, 2025, measures to offset bracket creep for 2025 and 2026; increasing the tax allowance the Tax Exemption of the 2024
competitiveness, also by reducing 2026 / tax-related for children and the basic personal allowance in 2024, 2025 and 2026; a Subsistence Income (Gesetz
disincentives to increase hours worked, family benefits further increase in child benefit as of 1 January 2025; and the simultaneous zur steuerlichen Freistellung
in particular for second earners. increasing of child benefit and the tax allowances for children as of 2026. des Existenzminimums 2024)
for the 2024 measures and via
This relief will make an important contribution to increasing disposable the Tax Law Development Act
incomes and work incentives for the broad majority of taxpayers. (Steuerfortentwicklungsgesetz)
for the measures as of 2025
and 2026; the parliamentary
procedure is ongoing.
Factor-based method Tax classes III and V will be replaced by the factor-based method (tax Ongoing legislative procedure,
class IV with factor). This will lead to a fairer distribution of burdens start envisioned as of 2030 due
for couples in terms of taxation over the course of the year, and will to the work required for the
increase the incentives for second earners to take up work. technical implementation.
Fast-start financing In order to create a positive incentive for the transition to jobs that are subject The aim is to discuss this measure
for citizen’s benefit to social security contributions and which cover the person’s needs, the federal within the federal cabinet before
government has decided within the framework of its growth strategy to introduce the end of autumn 2024.
fast-start financing as part of the citizen’s benefit. The money will be paid out as
a bonus. The fast-start financing is to be paid to the long-term unemployed once
they are no longer entitled to claim basic income support. It does not need to be
deducted as income from other benefits (basic child allowance, housing benefit). If
fast-start financing has been granted, there is a waiting period of at least 24 months
before this type of financing can be granted again. In general, a recipient must not
have been in previous employment and must not have resigned from a job.
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 2: Continue with the
implementation of the DARP, keep track Title of measure Description and direct relevance to target Status and timetable
of cohesion policy priorities
2.1 Significantly accelerate the REPowerEU chapter The Council decision on the acceptance of the amended German Completed
implementation of the recovery and Recovery and Resilience Plan (DARP) that was presented, including
resilience plan, including the REPowerEU a REPowerEU chapter, entered into force on 17 July 2024.
chapter once adopted, ensuring
completion of reforms and investments
by August 2026, and speed up the
implementation of cohesion policy Submission of the The second and third payment requests were submitted on 13 September 2024. Implementation in progress.
programmes, including by allocating second and third Following a positive assessment and the disbursement of the tranches, around 60%
sufficient resources to the management payment requests of all milestones and objectives will have already been successfully implemented.
of the recovery and resilience plan As a result, a volume of around two thirds of the DARP will have been paid out.
and cohesion policy programmes.
2.2 In the context of the mid-term Coordination of By 31 March 2025, the member states must carry out their mid- The finding of a survey conducted
review of cohesion policy programmes quotas for thematic term review for the EU Structural Funds in the current 2021-2027 by the BMWK on the ERDF in
continue focusing on the agreed focus in the ERDF and funding period and report any planned reprogramming. May 2024 was that the majority
priorities, while considering the ESF+ and utilisation of the German Länder will not
opportunities provided by the Strategic of opportunities In March 2024, the “Strategic Technologies for Europe Platform” (STEP) regulation prepare the mid-term review
Technologies for Europe Platform under ”STEP” came into force, which opens up extended funding opportunities (co-financing until the second half of 2024.
initiative to improve competitiveness. rate of 100%, pre-financing of 30% and limited funding for large companies)
within the framework of existing EU programmes and funds. For the ERDF, the Similar to the ERDF managing
funding for new STEP priorities is limited to 20% of the original allocation. authorities, the ESF+ managing
authorities at federal and Land
The Federal Ministry for Economic Affairs and Climate Action (BMWK) acts as a level are also currently starting
coordinator and mediator between the German Länder in order to keep an eye on their activities for the mid-term
planned changes with regard to the upper limits to be observed at national level review. The federal ESF+ managing
and the quotas for the political targets that also have to be met at national level. authority is planning to carry out the
mid-term review in the 4th quarter
of 2024 and the 1st quarter of 2025.

27
German Draft Budgetary Plan 2025
28
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 2: Continue with the
implementation of the DARP, keep track Title of measure Description and direct relevance to target Status and timetable
of cohesion policy priorities
As part of the survey conducted
by the BMWK (ERDF managing
German Draft Budgetary Plan 2025

authorities) and a survey conducted

by the Federal Ministry of Labour
and Social Affairs (BMAS) in April
2024 (ESF managing authorities), the
Länder were also asked about their
plans to apply the STEP Regulation.
The finding of the survey was that
around half of the Länder in the
ERDF are currently planning specific
reprogramming as part of STEP. In
the ESF+, including the federal ESF+
programme, there are no concrete
plans to use the STEP Regulation
in the 2021-2027 funding period.
Further coordination with the ERDF
and ESF managing authorities will
follow in the second half of 2024.
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 3:
Address the shortage of skilled workers, Title of measure Status and timetable
Description and direct relevance to target
speed up digitalisation and boost digital
communication networks
3.1 Address the shortage of skilled Conclusion of bilateral At the beginning of the legislative period, the federal government created the position Comprehensive migration
workers, particularly by strengthening migration partnerships of Special Commissioner for Migration Agreements with the aim of concluding partnerships have already been
basic and digital skills, and improving comprehensive migration partnerships in order to address the shortage of skilled concluded with India (December
education outcomes, including workers in Germany, among other objectives. A central component of the agreements is 2022), Georgia (December 2023),
by providing targeted support support for migration for educational and employment purposes in accordance with the Morocco (January 2024), Kenya
to disadvantaged groups. legal requirements of the Skilled Immigration Act (Fachkräfteeinwanderungsgesetz). and Uzbekistan (both September
2024). Negotiations are currently in
progress with Moldova, Kyrgyzstan,
Colombia and the Philippines.
Measures for foreign skilled workers

Federal Employment In order to further facilitate the immigration of skilled and other workers into the The extension was implemented
Agency time limit: German labour market, the federal government decided, as part of its growth strategy, by means of an instruction to the
to extend the period committed to by the Federal Employment Agency for advance Federal Employment Agency. The
extension of the approval in order to cut unnecessary bureaucracy and, in the event that a work permit target date is in autumn 2024.
advance approval period has yet to be issued, to avoid a renewed examination of the case after six months.

Temporary employment The federal government has decided to permit immigration of foreign workers The aim is to discuss this measure
for third-country for temporary agency work as long as the principle of equal pay is upheld within the federal cabinet before
nationals from the first day of employment and a minimum employment period of 12 the end of autumn 2024.
months is agreed. This will be implemented in an unbureaucratic way.

Expansion of the In order to give more workers from third countries access to the labour market, Preparations are in progress;
Western Balkans the federal government has decided to extend the arrangements for easier no target date for discussion
Arrangement access to the labour market under section 26 (2) of the Employment Ordinance within the federal cabinet.
(Beschäftigungsverordnung) to other countries, where possible in the context of migration
partnerships, and to increase the quotas in force for the existing countries accordingly.
Assumption that In order to improve the labour market integration of refugees, the federal government Preparations are in progress;
a work permit has has decided to introduce an assumption that a work permit has been provided by no target date for discussion
been provided the foreigners authority (Genehmigungsfiktion). The permit will be deemed to have within the federal cabinet.

29
German Draft Budgetary Plan 2025

been issued if, following consultation with the Federal Employment Agency, the
foreigners authority does not inform the applicant otherwise within two weeks.
30
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 3: Address the
shortage of skilled workers, speed up Title of measure Status and timetable
Description and direct relevance to target
digitalisation and boost digital
communication networks
Effective promotion In order to further improve the overall qualification level of workers, the Currently being reviewed.
German Draft Budgetary Plan 2025

of further training federal government has decided to reduce bureaucratic requirements

for certification in order to effectively promote further training.
Expansion and In order to increase employment levels among refugees and to improve their career Model is currently being developed,
consolidation of the prospects, the federal government has decided to expand the “job turbo” initiative no timeframe has been set.
“job turbo” initiative and put it on a permanent footing. In addition, in cases where it is difficult for
individuals to take up employment, a combination of work opportunities, compulsory
integration internships, further training and language courses will be introduced in
order to ensure the fastest possible successful integration into the labour market.
Expansion of Pension policy measures within the framework of the growth initiative include Adopted by the federal cabinet
employment the restriction of the “ban on prior employment” upon reaching the standard on 4 September 2024.
opportunities for older retirement age and the introduction of a pension delay bonus. In addition, employers
workers ; corresponding will be able to pay the amounts that were previously payable for employment Parliamentary deliberations
provisions in laws promotion measures and pension insurance to those employees who keep working are still pending.
covering public- even once they have reached retirement age, on top of their wages or salary. The • Abolition of the ban on prior
sector workers measures specifically increase the incentives to work for older employees. employment will enter into
force on 1 April 2025.
• Pension delay bonus can be
claimed as of 1 January 2028.
• Employers’ contributions can
be disbursed to employees
from 1 July 2025 onwards.
Reform of the With the aim of creating targeted incentives to work for recipients of a survivor’s pension, Adopted by the federal cabinet
supplementary a basic amount equivalent to the minimum income limit pursuant to section 8 (1a) on 4 September 2024.
income limits for of Book IV of the Social Code will be excluded from the calculation of the survivor’s
survivor’s pensions pension, if the recipient has earnings or short-term earnings replacement income.
Further amendments The current draft aimed at further developing the Act to Improve Quality and The draft act is going through the
to the Act to Improve Participation in Child Daycare represents another step towards a Quality Development parliamentary procedure; entry into
Quality and Participa- Act (Qualitätsentwicklungsgesetz) with nationwide standards for child daycare. force is planned for 1 January 2025.
tion in Child Daycare The amendments therefore focus on support for key quality areas such as “better
(KiTa-Qualitäts- und child-carer ratios”, “language support” and “daycare that meets families’ needs”.
-Teilhabeverbes-
serungsgesetz)
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 3: Address the
shortage of skilled workers, speed up Title of measure Status and timetable
Description and direct relevance to target
digitalisation and boost digital
communication networks
A change in the vertical apportionment of VAT revenue for 2025 and 2026 in The entry into force of
favour of the Länder (2025: €1,993 million, 2026: €1,993 million) is intended to the amendment to the
cover the additional burdens on the Länder resulting from the implementation Fiscal Equalisation Act
of the measures contained in the Act during those two years. (Finanzausgleichsgesetz) depends
on the conclusion of the amended
contracts between the Federation
and the Länder pursuant to section
4 (2) of the Act to Improve Quality
and Participation in Child Daycare
(Article 6 (2) of the draft act).
3.2 Speed up the digitalisation of Further implementation As part of the Federal Digitalisation Programme (Digitalisierungsprogramm Föderal), Begun/ongoing
public administration including by of the Online Access Act online services have been developed for a wide range of relevant administrative
increasing the geographic coverage (Onlinezugangsgesetz) services on the basis of the “one for all” principle. Around 200 online services
of digital public services. are available for subsequent use by the Länder and the local authorities.
The Länder are increasingly making these online services available on the IT
Planning Council’s digital marketplace for “one for all” services, in order to
facilitate their subsequent use. This helps to improve the geographic coverage
of digital public services within the Länder and local authorities.
3.3 Further boost the deployment of very Gigabit promotion The German government’s goal is to provide fibre optic to the home and the latest
high-capacity digital communication mobile communications standard by 2030 wherever people live, work and travel.
networks, including by facilitating the
necessary implementation of private For areas in which expansion by the relevant companies is not in their own
investment projects and mobilising economic interests, €2 billion will be available for new approvals for broadband
public resources where needed. expansion projects in 2024 and €1 billion in 2025 as part of Gigabit Funding 2.0.
Act to Accelerate Among other things, the Act to Accelerate the Expansion of Telecommunications The bill was passed by the cabinet
the Expansion of Networks reorganises the rules on the gigabit land register (single on 24 July 2024 and forwarded to
Telecommunications information point) and contains adjustments to the approval procedure the Bundesrat and the Bundestag.
Networks (Gesetz zur relating to rights of way and the creation of an entitlement to the use of
Beschleunigung des public buildings for the construction of mobile radio base stations.
Ausbaus von Telekom-
munikationsnetzen)

31
German Draft Budgetary Plan 2025
32
Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 4: Title of measure Status and timetable
Description and direct relevance to target
Accelerate decarbonisation
4.1 Accelerate the decarbonisation E-mobility: special Contrary to the measure described as “special depreciation” in the growth strategy to Planned implementation through
of the transport sector, including depreciation strengthen Germany as a centre for business, an arithmetically degressive depreciation the Tax Law Development Act
by upgrading the rail network. scale with graduated rates of decrease is to be introduced in a new section 7 (2a) of the (Steuerfortentwicklungsgesetz);
German Draft Budgetary Plan 2025

Income Tax Act (Einkommensteuergesetz) for newly acquired, purely electrically powered bill to be introduced by
vehicles that are part of fixed assets and were acquired after 30 June 2024 and before coalition faction
1 January 2029. As a result, the promotional objective of special depreciation can be
realised more easily and also retroactively based on declining balance depreciation.
In addition to the many existing tax incentives in the field of electric mobility,
the introduction of this depreciation option as an economic, business or
growth policy measure will provide clear tax incentives, particularly for
the market ramp-up of electric mobility in the business sector.
E-mobility: company The maximum amount for the gross list price for company car taxation for electric vehicle Implementation through
car taxation use in accordance with section 6 (1) no 4 sentence 2 no 3 and sentence 3 no 3 of the Tax Law Development Act
Income Tax Act (Einkommensteuergesetz) is to be increased to €95,000. The increase (Steuerfortentwicklungsgesetz);
is to apply to vehicles that are purchased or provided for use after 30 June 2024. procedure underway
This is intended to extend the scope of the provision and
favour the greater uptake of electric vehicles.
Rail Freight The federal government’s aim is to shift additional transport onto the railway
Masterplan (2017): and increase the share of rail freight transport in the modal split to 25%
by 2030. The starting point for rail freight transport policy continues to be
the Rail Freight Masterplan, which comprises a total of 66 measures.

Directive on the Single wagonload transport is an important lever for modal shift. The new operating BK-EWV: in force since 1 June
promotion of rail cost subsidy for single wagonload transport (BK-EWV), which came into force in June 2024 (runs until 31 May 2029)
freight transport via 2024, provides rail transport companies with long-term relief from high operating costs
a pro rata financing and is intended to secure and strengthen single wagonload transport in the region.
of operating costs
in single wagonload
transport (BK-EWV)
Directive on the federal Funding for innovation in rail freight transport in the areas of digitalisation, The aim is to extend the Z-SGV
programme “Future of automation and vehicle technology via the federal programme “Future of Rail as of 1 January 2025 (will run
Rail Freight Transport” Freight Transport” (Z-SGV, since 2020) is to be extended beyond 2024. until 31 December 2029)
(Z-SGV) for the
promotion of innovation
 Implementation of the country-specific recommendations Continuation Table 11

(CSRs) for 2024/2025 – as at 30 September 2024

The Council of the European Union
recommends that Germany take action Reporting period: April 2024 to March 2025
in 2024 and 2025 to:
Recommendation 4: Title of measure Status and timetable
Description and direct relevance to target
Accelerate decarbonisation
Tender for fast charging The federal motorway company Autobahn GmbH is conducting a first round of Expected Sept. 2024: publication
network for lorries tenders for lorry charging locations at around 130 unstaffed motorway service areas. of the invitation to tender
(publicly accessible),
together with Autobahn In order to support the ramp-up of climate-friendly commercial vehicles Second half of 2025:
GmbH and the National in long-distance transport, an infrastructure with high charging capacities award of contract
Control Centre for is required. By setting up this tender for the fast-charging network, the
Charging Infrastructure federal government is taking a further step towards decarbonisation.
Commercial fast The “Commercial fast charging” funding programme for climate-friendly e-cars and Continuation of the funding
charging (not publicly e-lorries (in non-public spaces) was continued on 3 June 2024. The transport and call from 3 June 2024; call
accessible) logistics sector can benefit significantly from the funding. Around half of the funding runs until 1 November 2024
volume has so far been allocated to applicants with commercial vehicle fleets. A further
€150 million has been made available for continuing the funding programme.

33
German Draft Budgetary Plan 2025
German Draft Budgetary Plan 2025

Methodological aspects Table 12

Relevant step of the Relevant features of the model/

Estimation technique Assumptions
budgetary process technique used

Macroeconomic forecast Before each tax Iterative-analytic approach: several Technical assumptions (for
revenue estimate partial models are used in the oil and commodity prices,
system of national accounts. exchange rates and interest)
Potential GDP is estimated on the
basis of models developed and
recommended by the Output Gaps
Working Group of the European Union’s
Economic Policy Committee (EPC).

Tax estimate Basis for drafting and Estimate based on macroeconomic Macroeconomic forecast,
finalising budget forecast and time series analysis estimates on the fiscal impact
of discretionary tax measures

Fiscal impact of Basis for tax revenue Microsimulation models based on Macroeconomic forecast
discretionary tax estimate and for drafting tax statistics; calculations based on
measures and finalising budget macroeconomic assumptions

34
Published by

Federal Ministry of Finance

Division LB 3 | Public Relations and Civic Dialogue
Wilhelmstr. 97
10117 Berlin
Germany

Edited by
Division I A 4

Publication date
October 2024

Further information can be found online at:

www.bundesfinanzministerium.de
www.federal-ministry-of-finance.de
bundesfinanzministerium.de