Germany's Cabinet set to approve 2025 budget after long negotiations

The German Cabinet is poised to approve the long-contested 2025 budget on Wednesday after weeks of wrangling over the finances of Europe's largest economy.

The draft, negotiated by the coalition leaders - Chancellor Olaf Scholz of the Social Democratic Party (SPD), Economy Minister Robert Habeck of the Greens and Finance Minister Christian Lindner of the pro-business Free Democratic Party (FDP), calls for a total budget of €480.6 billion (about $524 billion) - slightly less than this year.

Lindner is planning new loans totalling €43.8 billion, the maximum allowed by Germany's strict rules against ordinary budget deficits, known as the debt brake, which is enshrined in the country's constitution.

Scholz, Habeck and Lindner have been trying for weeks to close a financing gap of around €30 billion. It remains unclear if they have succeeded, as measures totalling about €8 billion are still under constitutional and economic review.

The Cabinet is also expected to approve a supplementary budget for the current year. The coalition plans to take on around €11 billion in additional debt.

The debt brake will nevertheless be adhered to, as it allows the federal government to take on higher loans due to the weaker economy.

Key points for a growth initiative are also to be decided. The measures are intended to increase economic growth by around 0.5 percentage points in the short term.

Companies are to receive incentives for investment through better depreciation conditions, while employees will get financial incentives for overtime and work during retirement.

Additionally, the government aims to make working in Germany more attractive for foreign skilled workers.