Thuringia Aims to Replenish State Reserves with $500 Million
Government Seeks to Address Projected Budget Deficit
Mühlhausen, Germany – The governing coalition in the German state of Thuringia has announced plans to bolster the state’s reserves by approximately $500 million. This move is aimed at addressing a projected budget deficit of over $1 billion by the 2026/2027 fiscal year.
Minister-President Mario Voigt (CDU) stated after a cabinet retreat in Mühlhausen that "we are looking to cover half of this shortfall in cooperation with the parliamentary factions in 2025."
Finance Minister Katja Wolf outlined the goal of reaching $500 million in state reserves by 2025. About $300 million is expected to come from budget surpluses in the recently dissolved COVID-19 special fund, which had been financed through loans.
The remaining funds will be secured through an innovative mechanism: the Thuringia State Development Corporation (LEG) will be authorized to acquire loans for investments, such as the construction of buildings. The state can then lease these buildings, freeing up funds in the budget that were previously earmarked for such investments.
Voigt expressed aspirations to "facilitate investments through the state’s development bank and relevant state-owned companies, thereby generating additional financial flexibility."
Potential Increase in Budget Volume
Voigt and Wolf acknowledged the possibility of a further increase in the state’s budget for 2025 due to adjustments in salaries and benefits for civil servants and state employees. This would require an additional allocation of over $100 million.
"We firmly commit to providing greater financial security to those who keep the state running," Voigt emphasized.
The draft budget submitted by the previous red-red-green government, which is currently under review in the state parliament, stands at around $13.75 billion.
Necessity for Fiscal Prudence
Experts have commended the Thuringia government’s proactive approach to addressing its projected budget deficit. They stress the importance of fiscal prudence and the need to balance investment and debt reduction.
The state’s strong economic performance in recent years has created fiscal space for the government to invest in infrastructure, education, and other key areas while maintaining a balanced budget.
However, some analysts caution that the government should tread carefully when resorting to loans for investments. They advocate for a prudent debt management strategy to ensure that future generations are not burdened with unsustainable debt levels.
The Thuringia government’s decision to bolster state reserves and address its projected budget deficit is a responsible and forward-thinking step that will safeguard the state’s financial stability in the coming years.
