Söder is planning a budget turnaround: New debts for daycare centers and housing construction?

Söder is planning a budget turnaround: New debts for daycare centers and housing construction?

Markus Söder, Bavaria's Prime Minister, commented on the Free State's financial situation after a cabinet meeting at Tegernsee. In his statement, he emphasized the challenges that lie ahead in the budget negotiations after the tax estimate coming in the fall. Söder explained that Bavaria has not taken on any new debt in 20 years, apart from spending to deal with the crisis during the corona pandemic and the rescue of BayernLB. Despite the challenges associated with this spending, the Prime Minister plans improvements in areas such as daycare centers and housing and assured that no savings would be made at the expense of investments or communities.

Söder also pointed out the global trends according to which many countries, including European countries, are taking on debt. The latest decisions in Berlin to relax the debt brake offer Bavaria additional financial leeway of around two billion euros. This development could become crucial for the Free State's budget policy in the coming years.

Financing projects and investments

A central topic in Söder's planning is the resumption of housing subsidies in Bavaria. Up to 400 million euros are available to address municipal and student funding requests. The approval commitments will be incorporated into the not yet finalized budget for 2026. In addition, an annual program for construction funding measures is to be launched from 2026.

The decision on how much the budget can be increased for the next few years will be made in the autumn. This assessment will also depend heavily on the results of the upcoming tax estimate. Söder emphasized the importance of solid finances for Bavaria and avoiding cuts that could jeopardize investments.

Nationwide challenges and possible solutions

In a broader context, the 2025 federal budget is also on the agenda. On July 5, 2024, the Tagesschau reported on a breakthrough in the traffic light coalition, which aims to comply with the debt brake. A gap of around ten billion euros had to be closed without an emergency being declared. In this context, various measures were presented, including an increase in child benefit and the child allowance.

The federal government's planned “growth package” is intended to stimulate the economy and promote private investment. Among other things, investments are being made in improving daycare centers. The SPD had previously called for the debt brake to be suspended in order to cope with the financial burdens caused by the war in Ukraine. These different approaches reflect the ongoing challenges facing both state and federal policymakers.

The agreement on the federal budget could also have an impact on future financial policy in Bavaria. The Bundestag will consider the draft budget from mid-September, with a decision possible in November or December. In this context, it will be exciting to see how the financial policy framework for the countries will change.