According to Thorsten Frei, the leader of the CDU parliamentary group in the Bundestag, German citizens will need to tighten their belts next year due to the strained financial situation of the federal government. Responding to a question from the newspaper “Bild” (Thursday edition), Frei stated that taxpayers will find areas in the budget draft where cuts are necessary. He explained that these required savings are highly controversial because they are neither popular among the public nor accepted by those affected.
Frei also expressed skepticism about the possibility of fully offsetting “cold progression” (the erosion of purchasing power due to inflation and tax brackets) by 2027 through changes to the income tax. He noted that the planned income tax reform provides for a partial compensation for this effect, but he declined to promise a complete solution.
He further explained that completely eliminating “cold progression” by 2027 would cost the state an additional four billion euros. Of this sum, Frei said that roughly 1.8 billion euros would need to be raised by the federal government, with an equal amount falling to the states, and the remaining difference being covered by municipalities.
The parliamentary group leader concluded by asserting that the lack of significant economic growth in Germany over the past seven years has massive repercussions on public finances, both directly and indirectly, particularly when considering expenditures related to social security and unemployment benefits.
