Weekly updates from the German Federal Parliament (Bundestag)
Germany Announces Second Supplementary Budget for 2021 and Extensions to Economic Support Programs
In a bid to bolster the economy and invest in climate protection and digitalization, the German government has proposed a Second Supplementary Budget for 2021, amounting to 60 billion euros. This budget, aimed at mitigating the economic impact of the COVID-19 pandemic, will not increase the net credit intake for the year 2021.
The Second Supplementary Budget is a joint initiative by the SPD, Alliance 90/The Greens, and FDP, and will be discussed in its first, second, and third readings this week. The budget aims to provide funds for climate protection measures and economic transformation, as well as for digitalization projects.
In another development, the EU Commission has extended the temporary framework for state aid until the end of June 2022. This extension allows large companies in Germany to continue receiving state funds beyond the end of the year from the Economic Stabilization Fund (WSF). Companies now have until 30 April 2022 to apply for funds from the WSF, a one-year extension from the previous deadline.
To accelerate the expansion of full-day care, 750 million euros were made available to the federal states and municipalities in advance, with a deadline for claiming these funds being 31 December. This extension aims to simplify the use of funds by merging the base and bonus pots. In principle, the funding pots will be reduced, as the available funds are far from exhausted.
Starting from 2026, pupils will have a legal entitlement to full-day care, gradually expanding from the first grade to include grades two to four. An amendment to the Full-Day Funding Act and the Full-Day Funding Aid Act is necessary due to unforeseen consequences of the corona pandemic and flood disaster in July 2021, causing delays in implementing measures.
Regarding the Government's Draft Bill related to this supplementary budget, explicit details of a specific draft bill tied directly to the 2021 second supplementary budget in the sources are not available. However, the government has issued various draft laws later related to tax reforms and minimum taxation. These draft bills aim to adjust fiscal frameworks, tax acts, and regulatory standards in line with broader goals like implementing the EU Minimum Tax Directive and OECD global tax rules.
In summary, the Second Supplementary Budget for 2021 aims to provide additional fiscal support to mitigate the economic impact of the COVID-19 pandemic. Its purpose is to stabilize the economy amid lockdowns and stalled recovery, maintaining household and business support. The Government's Draft Bills in this timeframe mainly reflect broader fiscal and tax reforms connected with EU and OECD strategies.
The Second Supplementary Budget, totaling 60 billion euros, is a response to the economic challenges posed by the COVID-19 pandemic, and it is anticipated to have a significant impact on finance, business, and general-news due to its focus on climate protection, digitalization, and economic stabilization. The extension of the EU Commission's temporary framework for state aid until June 2022 also signals the ongoing role of politics in business finance, as it allows large companies to continue receiving state funds beyond 2021.
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