Scholz defends 2025 budget cuts amid warnings that energy transition could suffer

As Germany’s coalition government struggles to agree on the country’s tightening 2025 budget, chancellor Olaf Scholz has defended planned austerity measures that would see major cuts in government spending. In an interview with public broadcaster ARD, Scholz made it clear that Germany’s financial leeway was limited, at least for the time being, due in part to a 25-billion-euro budget deficit. "We have to make do with the money we have. There is no way around it," the chancellor said. Scholz’s finance minister, Christian Lindner of the business-friendly FDP, insists that the government adhere to the so-called “debt brake” that limits borrowing and is demanding significant cuts in the budgets of several ministries, especially for social programmes, business daily Handelsblatt reported. Those demands have resulted in pushback from several ministries that reject the austerity targets. Scholz also underscored the grave challenges facing the nation, among them climate change, the wars in Ukraine and the Middle East, inflation and the government’s controversial coronavirus pandemic policies, which are to be reviewed. "We have to overcome these crises, of which there are so many at once,” Scholz said. The coalition has made a firm commitment to draw up a budget that is in line with the financial planning of the government ministries and the discussions have been constructive, Scholz said, adding that he was "very confident that we will get the budget underway in July."

Leading research institutes have warned against likely cuts in public funding for energy research that could lead to a "massive decline in German industry's ability to innovate in technologies for the energy transition."A ruling by Germany's highest court in November 2023 declared an integral part of the government's funding plan for climate and energy programmes unlawful, dealing a major blow to the Olaf Scholz’s coalition government. The court's decision has thrown the coalition's funding plans through a special "Climate and Transformation Fund" worth 60 billion euros into disarray, causing major uncertainty among policymakers, industry and citizens waiting to implement new projects. Civil society groups warned against the debt brake's impact on Germany's ability to navigate its transition towards greenhouse gas neutrality.