By Maria Martinez and Holger Hansen
BERLIN (Reuters) – Germany will be able to provide most of the 4 billion euros ($4.3 billion) pledged to Ukraine even if the 2025 budget cannot be approved on time following the collapse of the coalition government, sources from the budget committee told Reuters.
The funds are largely committed appropriations and can therefore be disbursed under provisional budget management if the budget is not passed, four sources said.
German aid to Ukraine was cut to 4 billion euros in 2025 from around 8 billion euros in 2024, according to the draft of the 2025 budget.
Germany hoped Ukraine would be able to meet the bulk of its military needs with the $50 billion in loans from the proceeds of frozen Russian assets approved by the Group of Seven industrialised nations.
However, the return of Republican Donald Trump to the White House raises concerns in Europe that U.S. support for Kyiv could diminish. Germany’s coalition government collapsed hours after Trump’s victory became clear on Wednesday, when Chancellor Olaf Scholz fired his finance minister, Christian Lindner.
“Politically, the turmoil in the German government is the first sign, the first reaction to Trump’s re-election,” said Gilles Guibout, head of European equity strategies at AXA Investment Managers in Paris.
A likely delay in next year’s budget means no spending on new projects, though some outlays such as more aid for Ukraine could still pass.
“Launching new funding programmes would require a decision from the budget committee or the Bundestag,” Economy Minister Robert Habeck said on Thursday. “Thus, there is a certain limitation on new programmes, but everything already in place can continue as planned.”
The cabinet agreed on the budget in the summer and it was due for parliamentary approval before year-end, but this now could get pushed back until mid-2025.
The collapse of the government increases uncertainty of the budget for 2025, said Danske Bank’s analyst Rune Thyge Johansen.
“However, Germany will not face a government shutdown like in the US as a provisional budget management will be in place,” he said.
Government sources said Scholz had wanted to increase a Ukraine support package by 3 billion euros ($3.22 billion) to 15 billion euros and to finance it by suspending the debt brake, a law that limits borrowing.
Lindner said the chancellor had tried to strong-arm him into breaking the spending limit, which Lindner, a fiscal hawk, refused to support.
“Especially today, one day after such an important event as the U.S. elections, this kind of selfishness is utterly incomprehensible,” Scholz said.
($1 = 0.9270 euros)
(Reporting by Maria Martinez; Editing by Peter Graff)
