By Linda Hall •
Updated: 21 Jan 2024 • 13:58
GERMANY: 2024 Budget shortfall as economy stagnates
Photo credit: Pixabay/Alexas Fotos
Germany has one of the world’s most comprehensive social welfare systems.
It allocates between 25 and 30 per cent of its gross domestic product (GDP) to pensions, health care, unemployment payments and other benefits, putting it well ahead of most European countries.
It is also the world’s second-largest donor of overseas aid for developing nations, spending €32 billion in 2022.
But now economists are asking how much longer this can last.
National daily Die Welt went so far as to quote The Economist which, 25 years after first attaching the damning label to Germany, asked if it was once again the sick man of Europe.
The economy shrank by 0.3 per cent in 2023, making Germany the only EU nation that saw no growth and analysts do not expect much improvement for 2024.
High energy prices, insufficient state investment in innovation or infrastructure coupled with intrusive bureaucracy are to partly to blame, the experts said.
They also singled out the two million baby-boomers due to retire within the next five years who will stretch the continually-expanding pensions budget.
Others point to the “Debt Brake” which prevents the government from borrowing more than 0.35 per cent of Germany’s annual national income, a Constitutional requirement which the Social Democrat party (SPD) and Greens want to reform or eliminate, maintaining that it hampers investment.
Other parties, including the current coalition government’s third partner, the Free Democrats, and right-wing opposition parties defend the measure. It obliges politicians to practise budgetary accountability and ensures a manageable national debt, they argue.
Meanwhile, a ruling by Germany’s Constitutional Court has ordered the government to renegotiate its 2024 Budget, leaving it with a yawning €30 billion shortfall.
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Originally from the UK, Linda is based in Valenca and is a reporter for The Euro Weekly News covering local news. Got a news story you want to share?
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