Due to the slow growth of the German economy and the introduction of tax benefits for citizens, the state budget will receive 33 billion euros less than expected. This situation forces Berlin to revise its financial planning in the coming years.
According to a new forecast by the German Ministry of Economy, tax revenues to the country's federal budget by 2029 will be 33.3 billion euros less than previous estimates. The total loss across the entire public sector, i.e., the federal level, lands, and local authorities, is expected to be 81.2 billion euros.
The decline in tax revenues is caused by two main factors:
1. Introduction of new tax benefits for citizens;
2. Due to the decline in economic growth rates, companies are paying less profit tax.
In 2025, the German economy is projected to grow at all, and in 2026, it will grow by only 1 percent. The Ministry of Economy announced this in April.
The country's new Finance Minister, Lars Klingbail, considers accelerating economic growth as the only solution in this situation:
"We need opportunities for new financial maneuvers. This can only be achieved through economic growth. "Therefore, we are now starting the most large-scale modernization in Germany, which has not been observed in recent decades," he said.
Given that Germany pursues a strict policy of maintaining budget balance, these financial deficits can create serious problems for the government. Now Berlin will be forced to find a balance between strict economic discipline and structural reforms.
