Germany’s Ukraine support for 2025 is safe despite coalition break-up, sources say
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A Ukrainian serviceman checking artillery shells at his front line position, amid Russia's invasion of Ukraine, on Oct 25.
PHOTO: REUTERS
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BERLIN - Germany will be able to provide most of the €4 billion (S$5.7 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 in 2025 from around €8 billion 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 US$50 billion (S$66 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 US support for Kyiv could diminish. Germany's coalition government collapsed hours after Trump's victory became clear on Nov 6, 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 Mr Gilles Guibout, head of European equity strategies at AXA Investment Managers in Paris.
A likely delay in the 2025 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 Nov 7. "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 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 Mr Scholz had wanted to increase a Ukraine support package by €3 billion to €15 billion and to finance it by suspending the debt brake, a law that limits borrowing.
Mr Lindner said the Chancellor had tried to strong-arm him into breaking the spending limit, which Mr Lindner, a fiscal hawk, refused to support.
"Especially today, one day after such an important event as the US election, this kind of selfishness is utterly incomprehensible," Mr Scholz said. REUTERS
