“First Steps towards Greater Precision”

Following the ruling by the Federal Constitutional Court, the government coalition has spent the last few weeks discussing how to set the budget for the coming year. The coalition has now reached a consensus on the budget for 2024. Friedrich Heinemann, head of the Research Unit “Corporate Taxation and Public Finance” at ZEW Mannheim and professor at Heidelberg University, has commented on this matter:

“The federal government’s decision to present a budget that conforms to the constitution is basically a step in the right direction. In climate policy, there’s a shift towards a bolder use of CO₂ prices, curbing selective technological subsidies, especially in electromobility. It is also to be welcomed that certain supports, such as subsidised diesel for agriculture, are finally coming to an end. This preferential treatment has been a particularly annoying issue in the long list of subsidies for decades. Refocusing on precision and work incentives in citizen’s basic income is also a welcome move towards improving the budget. But while the direction is right, more substantial reforms along these lines are needed in the coming years. The measures that have now been hastily adopted can only be the starting point for the comprehensive plan to steer the federal budget towards greater precision and impact-orientation. Once again, we are seeing how beneficial the debt brake is; it forces politicians to prioritise and helps them to counter interest groups when it comes to subsidies.”