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Federal Chancellor Olaf Scholz: The summer break is over

Photo: Michele Tantussi / Getty Images

For the Federal Government, it was the first cabinet meeting after a three-week summer break. And immediately there was a dispute again. For example, Federal Minister for Family Affairs Lisa Paus (Greens) is blocking the growth opportunity law of FDP Finance Minister Christian Lindner (read the detailed report on the background here).

On other projects, however, the cabinet was able to reach an agreement – and important projects were adopted. The overview:

Cuts in parental allowance and pension and long-term care insurance

The German government has initiated savings in various ministries in order to comply with the debt brake in the 2024 financial year. The cabinet approved the corresponding budget financing law by Finance Minister Christian Lindner (FDP), as government representatives confirmed. Among other things, this provides for cuts in parental allowance for higher incomes. Subsidies for pension and long-term care insurance will also be cut.

Higher CO2 price

The same bill also increases the carbon dioxide levy on refuelling and heating in two steps for the years 2024 and 2025. For the government's Climate and Transformation Fund, this means billions of euros in additional revenue.

Higher defense spending

For the first time, it is also enshrined in law that Germany wants to spend at least two percent of its economic output annually on defense. So far, this so-called NATO quota has also been met on a multi-year average.

The Bundestag will not decide on the entire federal budget until the end of the budget week on 1 December. Until then, numerous changes are to be expected in the draft budget and possibly also in the austerity projects. The draft budget for 5 adopted by the cabinet on 2024 July stipulates that the debt brake will be complied with again for the second year in a row. Lindner wants to fully exploit the scope for permissible new debt with just under 16.6 billion euros.

Expansion of solar energy

The German government has launched further measures to expand solar energy. To this end, the Cabinet approved a reduction in bureaucracy in order to address more than 50 identified obstacles in practice. The corresponding law could be discussed in parliament in the autumn and possibly come into force at the beginning of 2024.

Specifically, in the case of simple solar systems on balconies, registration with the grid operator is to be omitted. It also makes it easier to transfer solar power within apartment buildings. In the case of smaller plants in companies, it should be easier to present a necessary certificate. The simplified grid connection procedure will be extended to systems up to 30 kilowatts. This corresponds to about a threefold increase in performance. (Read here what buyers should look for in solar power plants.)

In addition, agricultural areas are to be opened up in principle for the promotion of solar systems. However, the expansion of photovoltaics on these areas is to be limited to 80 gigawatts by 2030. In the future, solar systems will also increasingly be built on already sealed surfaces such as parking lots.

Heat planning of municipalities

In the case of municipal heat planning, the Federal Government is considering longer transitional periods from which the requirements for the installation of climate-friendly heating systems should take effect. A draft law passed by the cabinet on Wednesday includes a corresponding test order for the Bundestag deliberations as to whether the municipalities could be given more time, a government representative told the Reuters news agency.

This would also have an impact on the controversial law for switching to climate-friendly heating systems. The bill stipulates that large cities must submit their heat supply plans by June 30, 2026. For municipalities with fewer than 100,000 inhabitants, this is to apply until mid-2028.

In the cover letter to the draft law by Construction Minister Klara Geywitz (SPD), the federal government points out that concerns about the deadlines agreed in the coalition had been raised in the hearing of states and associations. The Federal Government takes these concerns very seriously and "asks the German Bundestag to examine whether the request for an extension of the deadline (...) should be met".

An extension of the deadline would also mean longer transitional periods for the switch to more climate-friendly heating systems. Only when a municipal heat plan is in place will the obligation stipulated in the planned Building Energy Act from 2024 that new heating systems must be operated from at least 65 percent renewable energies take effect for existing buildings. After a long dispute in the traffic light coalition, this law is now to be passed by the Bundestag at the beginning of September.

With the Heat Planning Act, the federal states and thus all almost 11,000 cities and municipalities will for the first time be obliged to make binding plans as to the areas in which a connection to a district heating or hydrogen network will be possible. This is intended to be an alternative to, for example, an electricity-powered heat pump, which is considered climate-friendly.