Germany Considers Extra 2024 Budget to Plug €11 Billion Gap

(Bloomberg) -- The German finance ministry is considering a supplementary budget for this year with additional borrowing of as much as €11 billion ($11.9 billion), according to people familiar with the discussions.

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Negotiations within the ruling coalition are ongoing and a final decision on a revised 2024 finance plan — which could include a spending freeze — has not been taken, said the people, who asked not to be identified as the talks are confidential.

Finance Minister Christian Lindner could potentially take on more federal debt without breaching the borrowing rules in Germany’s constitution as they provide some wiggle room in times of economic weakness.

Net new debt was projected to be around €40 billion this year, down from about €70 billion in 2023, while Europe’s biggest economy is expected to stagnate after shrinking in 2023.

A spokesperson for the finance ministry said the government is monitoring the development of tax revenue and is ready to act at any time if needed. The possibility of a supplementary budget was first reported by Bild newspaper.

Chancellor Olaf Scholz’s unwieldy three-way coalition is currently locked in difficult negotiations on next year’s budget, which it hopes to sign off in cabinet on July 3.

The ruling parties — Scholz’s Social Democrats, the Greens and Lindner’s Free Democrats — are under pressure to show they can still function following a woeful performance in the EU Parliament elections last weekend.

Lindner has insisted that all of his cabinet colleagues except Defense Minister Boris Pistorius tighten their belts, ignoring calls from coalition partners, industry groups and economists to show more flexibility.

A poll for public broadcaster ZDF published Thursday showed dissatisfaction with the government at a record level. Among 1,334 voters surveyed June 10-12, 71% said they were unhappy with the coalition’s performance, up from 63% in May.

At the same time, two thirds of respondents believe the government will remain in office until the next election due in the autumn of 2025. Only 30% expect the coalition to break apart before then.

The latest tax-revenue estimates published in May projected federal income will be €5.6 billion less than expected in 2024. Over the five-year period through 2028, revenue will be on average about €8 billion lower.

(Updates with new poll starting in ninth paragraph)

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