Germany’s economy continues to be buoyant. Employment is at a record high and rising wages are driving strong domestic demand. Simultaneously, rates of economic growth and increases in tax revenue are returning to normal levels. For this reason, the German government will be focusing the national budget on the priorities agreed in the coalition agreement: investing in the future for more social cohesion and tomorrow’s prosperity.
- in € billion -
|Year-on-year change in %||+2,4||+1,7||+1,0||+1,6||+0,9|
|Of this amount: tax revenue||325,5||328,6||337,5||348,8||360,2|
* No “unbundling” funds after 2019 (federal allocations to the Länder following the discontinuation
of co-funding programmes in the areas of university construction, education, local transport and
Record investments to modernise Germany
The government is making record investments to make sure Germany is prepared for the future, boosts its innovative capacity and continues its modernisation. The benchmarks provide for €39.6bn worth of investments annually until 2023, including in particular investment in infrastructure, education, new housing, and research and development. This amounts to a total of over €158bn in the 2020-2023 period. No previous German government has spent so much on investment. The incumbent government is creating a foundation for long-term growth and laying the foundations for tomorrow’s prosperity.
A special emphasis will be placed on shaping the future of digital technology. At least €5.5bn – of which €5bn will be provided by the Federation – will be put towards helping schools go digital. A total of over €3bn is to be invested at the general government level in developing artificial intelligence between now and 2025. Furthermore, research and development is to receive preferential tax treatment this year in order to spark further investments. The benchmarks provide for this, too.
Germany is determined to fulfil its international responsibilities. For this reason, the German government is continuing with the turnaround it has initiated on defence spending, which will be increased by approximately €3.3bn between now and 2023. Simultaneously, official development assistance will be increased significantly, by approximately €5.1bn in the 2020-2023 period. Germany is thus set to remain the second-largest donor of official development assistance worldwide.
Measures to boost social cohesion and increase disposable incomes
The German government has set itself the aim of strengthening social cohesion in Germany. Everyone in Germany should benefit from the country’s economic success.
Especially families on low and middle incomes will benefit from another increase in child benefit and child allowances in 2021, more affordable pre-school child care and a better range of child care options. In addition, 2020 will see further measures to balance the effects of bracket creep. 90 percent of those currently paying the solidarity surcharge will no longer have to do so in 2021. These represent the biggest tax cuts in over ten years, worth over €25bn annually as of 2021.
At the same time, the German government is putting in place targeted measures to increase the number of affordable rental properties as well as the Baukindergeldprogramme which helps families with children buy homes. Further investments in education will give everyone the chance of a good education, maintain Germany’s innovative capacity and ensure the country is prepared for the challenges of the future. By promoting a social labour market, the government will help the long-term unemployed return to the world of work. Another €500m annually will be put towards supporting structural change in the regions affected by the coal phase-out. The benchmarks reflect all of this spending.
Internal security, too, will be receiving unprecedented levels of funding from the German government. The state will be employing significantly more security staff, for example at the police and at the customs’ special monitoring unit for undeclared work.
A responsible budget policy for sustainable finances
The German government sets priorities in its benchmarks and handles the budgetary resources responsibly. For this reason, the Federation will be taking out no new debt under its finance plan to 2023. This will make a decisive contribution to ensuring the level of general government debt will, according to the current projections, fall below the Maastricht threshold of 60 percent of GDP this year for the first time in 17 years. The German government thus ensures sustainable public finances and is creating financial leeway for any challenges to come. Germany thus remains well prepared for the future.