The agreement makes use of the flexibility within the EU’s new fiscal rules, with Berlin pledging to curb the pace of expenditure after a short-term investment boost.
“Due to investments in infrastructure, security and defense this year and next, net expenditure in the German national budget will increase significantly,” the official said. “Significantly lower growth in net expenditure is planned for the following years.”
The plan aims to strike a balance between investment, structural reform and fiscal consolidation, referencing the Cabinet’s June 24 budget decisions. By the end of the planning horizon, the government wants to return to a more balanced path, backed by “credible consolidation measures.”
The FSP also includes structural reforms that Berlin says will help grow government revenues over time, sending “a powerful signal for economic growth and sustainable public finances.”
The plan is scheduled to be approved by the Cabinet this Wednesday and will include a statement from the Stability Council representing Germany’s federal states.
