“Every day, millions of citizens ask themselves, can I get by on the money I have? Will it last till the end of the month?” said Federal Chancellor Scholz in his budget speech to the German Bundestag. These were serious questions, he said, and clear answers were needed. Scholz explained how the Federal Government planned to ease the burden of rising prices for citizens, with measures amounting to over 30 billion euros.
- The commuter tax allowance is being raised, backdated to January.
- The Renewable Energy Sources Act levy will be abolished in July to reduce electricity bills.
- Heating cost subsidies will be expanded from July to people on low incomes, recipients of housing benefits and students receiving Federal Training Assistance Act (BAföG) funding.
- The child bonus and immediate subsidy will benefit children and young people affected by poverty.
- All those in employment will receive a one-off payment of 300 euros to compensate for increased energy costs.
- June will see tax reductions on petrol and diesel and the introduction of the 9 euro ticket.
“This relief is coming in now, and over the coming days and weeks,” Scholz stressed. The Federal Chancellor explained how the Federal Government had created a protective shield consisting of subsidies, guarantees and affordable loans.
“Pensioners will also benefit from these relief packages”
The Federal Chancellor stressed that pensioners would also benefit from lower electricity bills, the fuel discount and the 9-euro ticket. He added that, from July, pensions would rise to a level not seen in decades, increasing by 6.12 percent in the East and 5.35 percent in the West.
Concerted action with social partners
“In everything we are doing now and will do in future, one thing is clear: long-term subsidies funded through borrowing are not a solution,” warned Scholz, who expressed his expectation that the Federal Government would return to compliance with the debt limit imposed by the constitution. The aim must be, he said, to mitigate inflationary pressures in the long term.
“We need a targeted effort in a wholly extraordinary situation,” Scholz said, pledging that the Federal Government would bring together employees, employers and trades union to take concerted action. The aim was to work together to find solutions that would make it possible to get around currently rising prices.
“On the verge of a second industrial revolution”
Scholz noted that fair wages were one such solution, but that many citizens were asking more fundamental questions, such as how safe is my job if energy is becoming more expensive while supply chains are becoming less secure? What happens next for Germany as an industrial nation? “We all know we are on the verge of a second industrial revolution,” Scholz said, stressing that two factors were critical in this:
- Supply security, where Germany would have to end its dependence on Russian gas, such as by building four new LNG terminals, developing new sources of supply and promoting hydrogen as a source of energy.
- Massive expansion of renewable energies: here the Federal Government had already passed its Easter package of measures, he said. Two further packages would follow in summer and autumn, Scholz said.
Putting citizens’ concerns and expectations first
Scholz pledged that the Federal Government would put citizens’ concerns and expectations at the heart of its policies. “People’s greatest concern at the moment is without doubt the terrible war that Russia has started against Ukraine,” said the Federal Chancellor.
“We all feel sympathy with the victims of this criminal war,” said the Federal Chancellor, who noted that the war had now been going on for almost 100 days, and “the number of victims rises with each passing day.”
“Putin cannot be allowed to win this war, and he will not win it”
Scholz stressed that President Putin could not be allowed to conquer all or part of the country by means of a brutal military operation. “It's imperialism, and we will not accept it in Europe,” the Federal Chancellor said.
In his address to the Bundestag, Scholz also spoke about deliveries of arms to Ukraine. “We are sending constant deliveries and have done so since this war began. Immediately after war broke out we took this decision, overturning years of state practice in Germany.”
With regard to Germany’s arms deliveries, Scholz made it clear that “Germany has nothing to hide.”
- A few days after war broke out, Germany sent deliveries of air defence missiles and anti-tank weapons.
- Since then over 15 million rounds of ammunition, 100,000 hand grenades and 5,000 anti-tank mines have been supplied.
- Large quantities of explosives and machine guns have been sent along with dozens of lorryloads of materials for drone defence, mobility, communications and supplies to care for the wounded.
- At the request of Ukraine, Germany worked with Denmark to supply 54 modernised armoured troop transports.
- Over the next few weeks, Germany will work closely with the Netherlands to supply twelve of the most advanced self-propelled howitzers in the world.
- Ukraine has signed a contract with the arms industry to supply Gepard armoured anti-aircraft vehicles. Training takes around three weeks and will get underway in the next few days.
- On a visit to Brussels, Federal Chancellor Scholz agreed with Prime Minister Mitsotakis of Greece that Greece would supply Ukraine with infantry fighting vehicles from the former East German army and Germany would restock Greek inventories with German infantry fighting vehicles.
- The Federal Government has also recently decided to supply the IRIS-T system, the most modern air defence system Germany possesses.
- In addition, Germany will supply Ukraine with a highly advanced counter battery radar system that can locate hostile howitzers, mortars and rocket artillery units.
Multi-billion investment in the Federal Armed Forces
The Federal Chancellor warned of the need to make good on earlier failings affecting the Federal Armed Forces. Scholz said the aim of the 100-billion-euro special fund was to create a “powerful and advanced Federal Armed Forces.” The Federal Chancellor this would create “what is likely to be the largest conventional army in the European NATO system”, adding: “This is the right response to this new era we have entered!”
“In these uncertain times we are ensuring safety and security with our 2022 budget and the Federal Armed Forces special fund, and also setting a new course for the future,” stressed the Federal Chancellor.
Expenditure is being planned by the individual ministries.
The budget of the Federal Finance Ministry includes spending worth 8.8 billion euros. Almost half of this (4.04 billion euros) will be used for personnel expenses. The Customs authority requires 3.11 billion euros to carry out its duties, while the Federal Information Technology Centre (ITZBund), which provides IT services for federal authorities and organisations, receives 1.13 billion euros. A total of 782.47 million euros are available to the Federal Central Tax Office.
At the presentation of the budget, Federal Finance Minister Christian Lindner reaffirmed that the debt limit still applies. Lindner stated that the planned return to compliance with debt regulations would ease the pressure of inflation. “We are responding to the new developments in security policy by reinforcing our armed forces. At the same time we are responding to the new economic situation and inflation by returning to robust budgets and by putting an end to constantly acquiring new debts,” stressed Lindner.
The defence budget occupies a particularly important position this year due to the war in Ukraine, as Russia’s war of aggression against Ukraine shows the importance of well-equipped armed forces.
Following a long period of cuts, the defence budget has been rising again for a few years. From now on the so-called “Detailed Plan 14” for the Ministry of Defence will allocate around 50.4 billion euros to the Federal Armed Forces in the 2022 budget year. This is some 3.5 billion euros more than the previous year. In this the defence budget is laying the essential foundations to raise the operational readiness of the Federal Armed Forces, thereby increasing Germany's defence capabilities.
“If you want to live in peace you need military strength to defend peace,” said Defence Minister Christine Lambrecht in her speech to the Bundestag. What is needed is a powerful Federal Armed Forces that can defend itself and be a reliable ally.
In order to cover the increased funding requirements to strengthen national and NATO defence capabilities, the Bundestag is debating an additional Federal Armed Forces Special Fund worth 100 billion euros. This is primarily aimed at funding complex, multi-year schemes.
Detailed Plan 12 of the budget has traditionally been the Federal Government’s largest investment budget. The Federal Ministry for Digital and Transport has been allocated 36.1 billion euros for 2022, including 21.82 billion euros for investments.
Spending worth 12.18 billion euros is set aside for national highways, with 9.95 billion euros provided for national rail routes. As with last year, one billion euros are being made available to improve transport conditions in communities.
A total of 456.16 million euros are allocated to expanding digital infrastructure in 2022. Plans are also in place for a Digital Infrastructure Special Fund (Detailed Plan 60) for projects such as expanding gigabit and mobile networks. Over 2.6 billion euros are to be provided for the fund this year. “Our goal is to achieve mobility that meets people's widely diverse needs,” said Federal Transport Minister Volker Wissing in his speech to the Bundestag. “Most importantly we must take advantage of digitalisation and ensure that data can be provided, shared, linked and used in a secure way.”
A total of 2.2 billion euros is allocated to the Federal Ministry for the Environment and Consumer protection. The budget provides additional funding for key areas in environmental and consumer protection, including nature conservation, marine environment protection and species protection.
Federal Minister for the Environment Steffi Lemke stressed the need to boost funding for environmental and natural protection given the global climate crisis and species extinction. “Ambitious environmental protection is an investment in the future. It secures the basis of our existence and will pay off for us and for future generations. As a society we are reducing our vulnerability to the impact of the climate crisis, boosting healthy ecosystems, protecting resources and taking steps against the pollution of water, the ground and the air.
Further information on the planned spending can be found on the ministry's website.
The budget for the Federal Ministry for Housing, Urban Development and Building is focused on building affordable homes and promoting building that is sustainable, climate-friendly and age-appropriate. A sum of just under 5 billion euros is being provided for this purpose. “The new Building Ministry is above all a ministry for investing in the future of our society,” stressed Minister Klara Geywitz. “One of our key goals is to create more homes, especially homes that anyone can afford.”
The Federal Government is providing 14.5 billion euros to support building social housing by the Länder between 2022 and 2026. “This is a huge contribution that will, amongst other things, ease shortages in large urban areas,” Geywitz said. Additional funding has been allocated to payments of subsidies to promote family housebuilding (Baukindergeld) and housing benefits and to urban development funding and urban development. This includes the renovation of municipal institutions for sport, young people and culture.
The Federal Government aims to reach a level of 400,000 new homes being built each year, including 100,000 social housing units. “We have to do all we can to make how we build more efficient so that these homes can actually get built quickly,” said Federal Minister Geywitz. “We have to increase the productivity of the building sector. Alongside diggers and cement, software and AI must have a place on the building sites of the future.”
This autumn the Federal Government intends to agree a pact with the Länder to accelerate the planning and approval process. Climate protection and building new social housing must go hand-in-hand. This is to be achieved through the use of sustainable construction materials and modern designs. Adapting cities to climate change is another major responsibility, so a total of 176 million euros is being channelled through the Energy and Climate Fund to create more urban green spaces and storage capacity for water.