German Chancellor Olaf Scholz has declared that his coalition has reached a consensus on the budget following a month of crisis discussions.

The constitutional court of Germany had ruled last month that the upcoming year's budget was unlawful, as it violated borrowing restrictions.

Despite committing to maintaining low deficits, the government opted to curtail certain green subsidies. Subsidies for solar energy and electric cars will end sooner than initially planned.

Scholz's three-party coalition faced turmoil when the top court deemed the 2024 budget unconstitutional due to exceeding the allowed deficit of 0.35% of GDP.

Although the resulting gap was a small fraction of the total budget, around €17 billion or 3.8%, filling it proved politically challenging. The coalition ultimately agreed to cut subsidies for green initiatives, including energy, construction, and transportation.

Scholz emphasized that the government remains committed to environmental goals but acknowledged the need to navigate them with reduced funding.

As part of the cuts, subsidies for electric cars and solar energy infrastructure will be phased out faster, and the funding model for Germany's railways will change.

Decreased spending on the electrical grid will result in higher costs for consumers. However, approximately €3 billion in subsidies for environmentally harmful industries will be reduced, and carbon emission prices for companies will rise, partly offsetting the environmental cuts.

Despite these adjustments, Germany's support for Ukraine, amounting to €8 billion in aid next year, will remain unaffected, according to Finance Minister Christian Lindner.

Each of the three supporting parties in Scholz's coalition claims victories in the spending agreement, with the Social Democrats highlighting limited cuts to the welfare state, and the Free Democrats taking credit for averting new borrowing.

And the Greens say the government is sticking to its core environmental aims, even if certain schemes have been rolled back.

Germany's political culture is strongly opposed to debt and deficits. However, some economists say an aversion to high spending has led to persistent underinvestment in key infrastructure.

The country has one of the lowest public debts of the big developed countries.

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