Thuringia on the edge of the abyss: budget hole of one billion euros!

Thuringia on the edge of the abyss: budget hole of one billion euros!

The Thuringian state government is facing a financial challenge that will be discussed in a special session. A budget gap of one billion euros is a topic of discussion in the cabinet, which plans to decide on the key figures for the double budget for 2026 and 2027 on Friday. In this context, Finance Minister Katja Wolf (BSW) commented on the country's tense financial situation and predicted a further deterioration in income.

Falling tax revenues are the result of tax relief and a stagnating economic situation. The specific figures for Thuringia should be available by Tuesday, although it is already clear that Thuringia will continue to be confronted with economic challenges in the coming years. Wolf points out that major adjustments to the budget are no longer necessary, although the tax estimate offers a forecast until 2029.

Budget targets and infrastructure investments

The aim of the new budget is to compensate for the structural deficit of around one billion euros while at the same time creating scope for investments. A focus in the coming years will be on improving the infrastructure in order to stabilize the economic situation in the long term.

In addition, there are nationwide trends that reflect the Thuringian situation. According to Finance Minister Heike Taubert, it is expected that the federal, state and local government revenue expectations for the years 2024 to 2029 will have to be revised downwards. This assessment comes from the results of the “Tax Estimates” working group, which met in its 167th meeting in Gotha. For the state as a whole, revenue shortfalls of 58.1 billion euros are forecast compared to the estimate from May 2024, of which 22.8 billion euros are attributable to the states and 2.7 billion euros to the municipalities.

Changed economic conditions

Taubert points out that the German economy has been moving sideways for four years. The first signs of an economic recovery can be seen, although tax revenues are expected to remain weak in the coming years. For the 2025 budget draft, all of the country's reserves had to be dissolved in order to finance the planned expenditure.

Although tax revenues are expected to increase from 916 billion euros in 2023 to 1,134 billion euros in 2029, this increase will not be as strong as in previous years. The “Tax Estimates” working group met and the framework conditions for Thuringia and the municipalities will be presented at a press conference on October 28, 2024 at the Thuringian Ministry of Finance in Erfurt.

Given these developments, the price-adjusted gross domestic product is forecast to decline to -0.2 percent in 2024, while expected growth is +1.1 percent in 2025 and +1.6 percent in 2026. Annual growth of +0.9 percent is assumed for the period from 2027 to 2029. The challenges will therefore remain considerable in the coming years.

The developments highlight the difficulties facing Thuringia and highlight the need for careful management of the country's finances. The focus on investments in infrastructure now seems even more important in order to strengthen the economic basis and make it sustainable.

For further information on the financial conditions in Thuringia, click on the reports from MDR and Thuringia finances.