Germany pushes ahead with budget preparations while seeking savings, document shows

By Christian Kraemer

BERLIN (Reuters) -Germany's new finance minister has begun intensive preparations for the 2025 and 2026 budgets, with savings sought despite the government giving itself fiscal room by creating a new infrastructure fund, a document seen by Reuters on Monday showed.

After former chancellor Olaf Scholz's coalition collapsed in November, the last government ran out of time to pass the 2025 budget. Germany has instead been operating on a provisional budget since the start of the year.

In the planned official budget, however, new finance minister Lars Klingbeil will be looking for savings.

"As finance minister, I will push for every ministry to come up with savings," Klingbeil told Redaktionsnetzwerk Deutschland on Sunday.

Germany in March approved plans for a massive spending surge, including a 500 billion euro ($570 billion) fund for infrastructure and exemptions from debt rules for defence spending.

Even with this, "leaning back ... is not an option," Klingbeil said.

Germany is facing two important challenges according to the document seen by Reuters. The first one is security.

"Our security is more threatened today than at any time since the end of the Cold War. The greatest threat comes from Russia," finance ministry state secretary Steffen Meyer said in the document.

The second challenge is ongoing economic weakness, with Europe's largest economy failing to grow for two consecutive years and the government forecasting stagnation this year.

The document sets the three priorities of the new finance ministry: investments for modernizing Germany, structural reforms to enhance competitiveness and ease the burden on the public and on business, and budget consolidation.

"Now is the moment to quickly raise the potential of the German economy and go back to a higher and sustainable growth path," Meyer said.

According to the document, the draft budget for 2025 will be approved by cabinet on June 25, the first discussion in parliament will take place in July and the budget committee will finalise the details in September, when it should also be approved by lawmakers.

In parallel, the first draft of the 2026 budget should be approved on July 30. It is to be discussed in parliament in September, then approved in the lower house of parliament in November and the upper house in December, following the usual schedule.

($1 = 0.8874 euros)

(Reporting by Christian Kraemer and Maria Martinez, Editing by Rachel More and Hugh Lawson)