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German Draft Budgetary Plan 2018

German Draft Budgetary Plan of the General Government(Federation, Länder, local authorities and social security funds)in accordance with EU-Regulation No. 473/2013

Update: June 2018

German Draft Budgetary Plan 2018

Page

Public finances in Germany ............................................................................................................................ 4

Tables:

Table 1: Impact of Coalition Agreement’s priority measures and other quantifiable measures on the general government budget balance ........................................................ 5Table 2: General government budget balance and debt .......................................................................6Table 3: Technical assumptions .......................................................................................................................7Table 4a: Forecast of macroeconomic trends... ............................................................................................8Table 4b: Price developments - deflators. ......................................................................................................9Table 4c: Labour market trends .........................................................................................................................9Table 4d: Sectoral balances............ .................................................................................. ..................................10Table 5a: General government budgetary targets broken down by subsector.............. .............11Table 5b: General government debt developments ("Maastricht" debt) ............................... ........12Table 6: Expenditure and revenue projections under the no-policy-change scenario ....... 13Table 7a: General government expenditure and revenue targets ................................................... 14Table 7b: Amounts to be excluded from the expenditure benchmark.......................................... 15Table 8: Discretionary measures at the general government and federal level ...................... 16Table 9: Divergence from April 2018 Stability Programme ............................................................. 18Table 10: Implementation of the 2017 country-specific recommendations (CSR) ................ 19Table 11: Targets set by the EU’s strategy for growth and jobs ........................................................ 27Table 12: Methodological aspects ................................................................................................................... 31

CONTENTS PAGE 3

Contents

Germany’s updated 2018 draft budgetary plan presents the fiscal projections for the budgets of the Federation, Länder, local au-thorities and social security funds (including their off-budget entities) on the basis of cur-rent trends and planning. The sources used as a basis for making these fiscal projections include the second draft of the 2018 federal budget (adopted on 2 May 2018 by the fed-eral government) as well as the benchmark figures for the 2019 draft federal budget and for the financial plan to 2022 (also adopted on 2 May 2018 by the federal government).

Germany is in compliance with the re-quirements of the Stability and Growth Pact. Its debt-to-GDP ratio will remain above the Maastricht reference value of 60% in 2018 but will fall below this target in 2019, for the first time since 2002. Germany is thus in full compliance with EU rules with a view to en-suring sustainable fiscal policies.

The federal government is placing a particular emphasis on increasing aggregate investment. At the same time, the federal budget will contain no new borrowing. The federal government has pledged to take priority measures in policy areas that are crucial for Germany’s future, including education, research, universities and digital technology. In addition, child care will be improved, and citizens – young families in particular – will be provided with ex-

tensive tax relief (see Table 8). The second draft of the 2018 federal budget as well as the benchmark figures for the 2019 draft federal budget and for the financial plan to 2022 take full account of the priority mea-sures contained in the Coalition Agreement between the governing parties. In addition to the priority measures agreed upon by the governing coalition, the updated draft budgetary plan presented here includes fur-ther measures: these include, in particular, an increase in the basic personal tax allow-ance; the planned reintroduction of the rule requiring employers and employees to pay fully equal contributions to statutory health insurance from 1 January 2019 onwards, in accordance with the Coalition Agreement; and a reduction of the unemployment in-surance contribution rate by 0.3 percentage points.

Taken together, all of these additional measures will reduce the general govern-ment budget surplus by a total of 2.8% of GDP during the projection period from 2018 to 2022 (see Tables 1 and 8). Despite consid-erable increases in spending and reductions in revenue, the general government budget will not take on additional debt.

Public finances in Germany

Information on the draft budgetary plan in accordance with Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 and in accordance with the related Code of Conduct

GERMAN DRAFT BUDGETARY PLAN 2018 PAGE 5

The government’s investment expendi-ture will also – via investment grants – boost private investment. The forecast assumes that the Federation’s investment activities – insofar as they take the form of grants and transfers to the Länder and local authori-ties – will generate additional investment expenditure by the Länder and local au-thorities and in some cases will also be aug-mented by co-financing from the Länder.

Forecast for public finances

• The general government budget encompassing the Federation, Länder, local authorities and social security funds will run a smaller surplus: In 2017, the general government budget ran a surplus of 1.3% of GDP (this figure is current as of 23 April 2018). The budget surplus is expected to amount to approximately 1¼% of GDP in 2018. During the years from 2019 to 2022, the surplus is expected to fall markedly to somewhere between ¾% to ½% of GDP due to the implementation of the measures described above. Budget balances at the different government levels are expected to vary. While the Federation’s budget is expected to be balanced, the Länder and local authorities are expected to continue posting solid aggregate surpluses ranging from ½% to ¾% of GDP.

2018 2019 2020 2021 2022

Cumulative impact for the

2018 – 2022 period

– in % of GDP–

Revenue 0.0 -0.2 -0.3 -0.5 -0.5 -1.5

Expenditure 0.0 0.2 0.3 0.4 0.3 1.3

Current expenditure 0.0 0.2 0.2 0.3 0.3 0.9

Investment expenditure1) 0.0 0.1 0.1 0.1 0.1 0.4

Budget surplus reduction / fiscal stimulus 0.0 -0.4 -0.6 -1.0 -0.8 -2.8

Any discrepancies in totals are due to rounding.

1) Not including the fund to expand/upgrade digital infrastructure.

Table 1: Impact of Coalition Agreement’s priority measures and other quantifiable measures on the general government budget balance (reduced revenue/additional expenditure)

• Compliance with medium-term budgetary objective: The structural balance, i.e. the budget balance adjusted for cyclical and one-off effects, maintained a safety margin in 2017 and will continue to do so in 2018, thus ensuring compliance with EU rules. Germany will meet its medium-term budgetary objective, i.e. a structural deficit no greater than 0.5% of GDP. Germany therefore remains in compliance with the targets of the Stability and Growth Pact, which stipulates that the general government budget should be close-to-balance or in surplus.

• Steady reduction of the debt-to-GDP ratio: Thanks to the general government budget surplus and the strong performance of the economy, Germany’s debt-to-GDP ratio (Maastricht definition) is expected to fall to 61% in the current year. The continued healthy state of public finances and the ongoing winding down of resolution authority portfolios are helping to reduce the debt ratio. This puts Germany in a position to bring its debt ratio below the 60% threshold in 2019. This will further secure the sustainability of public finances and make Germany’s fiscal position more resilient to risks and the budgetary consequences of demographic change.

2016 2017 2018

- in % of GDP -

Budget balance 1.0 1.3 1 ¼

Structural balance 1.3 1.5 1

Maastricht debt-to-GDP ratio 68.2 64.1 61

Figures for the projection period are rounded to quarter percentage points of GDP.

Table 2: General government budget balance and debt


Table 3: Technical assumptions

2016 2017 2018

Short-term interest rate (annual average in %) 0.01 0.00 0.00

USD/€ exchange rate (annual average) 1.11 1.13 1.23

Growth of German sales markets (in %)1) 3.5 5.3 4 ¾

Oil price (Brent, USD/barrel) 43.6 54.3 69

1) Figure for the projection period is rounded to quarter percentage points.

Implementation of the country- specific recommendations

Germany’s updated draft budgetary plan for 2018 includes key measures that aim to implement the Council’s country-spe-cific recommendations of 11 July 2017. The measures will have effect in 2017 and the years that follow.

Basis for the updated 2018 draft budg-etary plan

The updated 2018 draft budgetary plan is based on the following information:

• Draft Act Adopting the Federal Budget for the 2018 Fiscal Year (Gesetz über die Feststellung des Bundeshaushaltsplans für das Haushaltsjahr 2018), adopted by the federal government on 2 May 2018

• Benchmark figures for the 2019 draft federal budget and for the financial plan to 2022, adopted by the federal government on 2 May 2018.

• Results for the general government budget in the national accounts, published 23 February 2018 (Federal Statistical Office)

• Results for general government debt and general government budget balance (Eurostat press release dated 23 April 2018)

• Federal government spring projection on macroeconomic developments, dated 25 April 2018

ESA Code

2016 2016 2017 2018 2019 2020 2021 2022

Index(2010=100) rate of change in %

1. Real GDP, chain index B1*g 110.67 1.9 2.2 2.3 2.1 1.4 1.4 1.4

2. Potential GDP (€bn) 2,860.9 1.6 1.8 1.9 1.8 1.8 1.7 1.6

contributions (percentage points):

- labour 0.5 0.6 0.6 0.5 0.4 0.3 0.2

- capital 0.4 0.4 0.4 0.4 0.5 0.5 0.5

- total factor productivity 0.7 0.8 0.8 0.9 0.9 0.9 0.9

3. Nominal GDP (€bn) B1*g 3,144.1 3.3 3.8 4.2 4.1 3.3 3.3 3.3

Components of real GDP, chain index

4. Private consumption expenditure1) P.3 108.31 2.1 1.9 1.7

5. Government consumption expenditure P.3 111.94 3.7 1.6 2.6

6. Gross �xed capital formation P.51g 114.13 3.1 3.3 3.7

7. Changes in inventories (GDP growth contributions)

P.52 + P.53 - -0.2 0.1 0.0

8. Exports P.6 127.98 2.6 4.7 5.0

9. Imports P.7 125.18 3.9 5.1 5.8

Contribution to real GDP growth percentage points

10. Domestic demand (excluding stocks)

- 2.4 2.0 2.2

11. Changes in inventories P.52 + P.53 - -0.2 0.1 0.0

12. External balance of goods and services

B.11 - -0.3 0.2 0.1

2016 and 2017: Federal Statistical Office, February 2018.2018 to 2022: Federal government spring projection on macroeconomic developments, April 2018.

1) Including private non-profit organisations serving households.

Table 4a: Forecast of macroeconomic trends


Table 4b: Price developments - deflators

2016 2016 2017 2018 2019 2020 2021 2022

Index (2010=100) rate of change in %

1. GDP 110.11 1.3 1.5 1.9 2.0 1.9 1.9 1.9

2. Private consumption expenditure1) 106.89 0.6 1.7 1.8

3. HICP - - -

4. Government consumption expenditure 111.44 1.1 2.2 2.4

5. Gross capital formation 112.04 1.4 2.4 2.0

6. Exports 103.94 -1.0 1.6 0.8

7. Imports 100.22 -2.5 2.6 0.7

2016 and 2017: Federal Statistical Office, February 2018.2018 to 2022: Federal government spring projection on macroeconomic developments, April 2018.

1) Including private non-profit organisations serving households.

Table 4c: Labour market trends

2016 and 2017: Federal Statistical Office, February 2018.2018: Federal government spring projection on macroeconomic developments, April 2018. 1) Employed persons, domestic concept, national accounts definition.2) National accounts definition.3) Harmonised definition, Eurostat; levels.4) Real GDP per person employed (2010=100).5) Real GDP per hour worked (2010=100).

ESA Code

2016 2016 2017 2018

Level rate of change in %

1. Employment - persons1) (in millions) 43.64 1.3 1.5 1.3

2. Employment - hours worked2) (bn hours) 59.29 0.6 1.1 1.5

3. Unemployment rate (%)3) - 3.9 3.5 3.1

4. Labour productivity - persons4) 104.0 0.6 0.7 1.0

5. Labour productivity - hours worked5) 106.4 1.3 1.1 0.7

6. Compensation of employees (€bn) D.1 1,598.2 3.8 4.4 4.3

7. Compensation per employee (thousand €) 40.7 2.2 2.6 2.7

Table 4d: Sectoral balances

ESACode

2016 2017 2018

- in % of GDP -

1. Net lending/net borrowing vis-à-vis the rest of the world B.9 8.5 7.9 7.8

of which:

- Balance on goods and services 8.0 7.6 7.5

- Balance of primary incomes and transfers 0.5 0.4 0.4

2. Net lending/net borrowing of households B.9 5.1 5.1 4.9

3. Net lending/net borrowing of general government1) B.9 1.0 1.3 1 ¼

4. Statistical discrepancy - -

2016 and 2017: Federal Statistical Office, February 2018.2018: Federal government spring projection on macroeconomic developments, April 2018.

1) 2016 and 2017: Eurostat, press release of 23 April 2018; figures for the projection period are rounded to quarter percentage points of GDP.


Table 5a: General government budgetary targets broken down by subsector

ESA Code

2017 2018 2019 2020 2021 2022

- in % of GDP -

Net lending (+)/net borrowing (-) (B.9) by subsector1)

1. General government S.13 1.3 1 ¼ ¾ ¾ ½ ¾

2. Central government S.1311 0.2 ¼ 0 0 0 ¼

3. State government S.1312 0.5 0 ¼ ½ ¼ ¼

4. Local government S.1313 0.3 ½ ¼ ¼ ¼ 0

5. Social security funds S.1314 0.3 ½ ¼ 0 0 0

General government (S.13)

6. Interest expenditure D.41 1.1 1 1 1 1 1

7. Primary balance2) 2.3 2 ¼ 1 ¾ 1 ¾ 1 ½ 1 ½

8. One-off and other temporary measures3) - 0.3 - ¼ 0 0 0 0

9. Real GDP growth (%) 2.2 2.3 2.1 1.4 1.4 1.4

10. Potential GDP growth (%) 1.8 1.9 1.8 1.8 1.7 1.6

contributions (percentage points):

-labour 0.6 0.6 0.5 0.4 0.3 0.2

-capital 0.4 0.4 0.4 0.5 0.5 0.5

-total factor productivity 0.8 0.8 0.9 0.9 0.9 0.9

in % of potential GDP

11. Output gap 0.2 0.6 0.9 0.5 0.2 0.0

12. Cyclical budgetary component 0.1 ¼ ½ ¼ 0 0

13. Cyclically adjusted balance (1 - 12) 1.1 ¾ ¼ ½ ½ ¾

14. Cyclically adjusted primary balance (13 + 6)

2.2 1 ¾ 1 ¼ 1 ½ 1 ½ 1 ½

15. Structural balance (13 - 8) 1.5 1 ¼ ½ ½ ¾

1) TR - TE = B.9.2) The primary balance is calculated as (B.9, item 1) plus (D.41, item 6).3) A plus sign means deficit-reducing one-off measures.


Table 5b: General government debt developments ("Maastricht" debt)

ESA Code

2017 2018 2019 2020 2021 2022

- in % of GDP -

1. Gross debt 64.1 61 58 ¼ 56 ¼ 54 ¼ 52

2. Change in gross debt ratio -4.1 -3 ¼

Contributions to changes in gross debt

3. Primary balance 2.3 2 ¼

4. Interest expenditure D.41 -1.1 -1

5. Stock-flow adjustment 2.9 1 ¾ 1 ¼ 1 1 1

p.m.: Implicit interest rate on debt1) 1.6 1 ¾

1) Proxied by interest expenditure divided by the debt level of the previous year.

Figures the projection period years are rounded to quarter percentage points of GDP.


Table 6: Expenditure and revenue projections under the no-policy-change scenario*

General government (S. 13) ESA Code

2017 2018

- in % of GDP -

1. Total revenue at unchanged policies TR 45.2 44 ¾

of which:

1.1. Taxes on production and imports D.2 10.6 10 ½

1.2. Current taxes on income, wealth, etc. D.5 12.9 13 ¼

1.3. Capital taxes D.91 0.0 0

1.4. Social contributions D.61 16.8 16 ¾

1.5. Property income D.4 0.5 ½

1.6. Other1) 4.4 4

p.m.: Tax burden (D.2+D.5+D.61+D.91-D.995)2)

40.3 40 ¼

2. Total expenditure at unchanged policies TE3) 43.9 43 ¾

of which:

2.1. Compensation of employees D.1 7.6 7 ½

2.2. Intermediate consumption P.2 4.8 4 ¾

2.3. Social payments D.62 +D.632 24.0 23 ¾

of which:Unemployment benefits4) 1.5 1 ¼

2.4. Interest expenditure D.41 1.1 1

2.5. Subsidies D.3 0.8 ¾

2.6. Gross fixed capital formation P.51 2.2 2 ¼

2.7. Capital transfers D.91 1.3 1 ¼

2.8. Other5) 2.2 2 ¼

* Please note that the no-policy-change scenario involves the extrapolation of revenue and expenditure trends before adding the impact of the measures included in the forthcoming year's budget.

1) P.11 + P.12 + P.131 + D.39rec + D.7rec + D.9rec (other than D.91rec).2) Including those collected by the EU and including an adjustment for uncollected taxes and social contributions (D.995), if appropriate.3) TR - TE = B.9.4) Includes social benefits other than social transfers in kind (D.62) and social transfers in kind via market producers (D.632) related to unemployment benefits.5) D.29pay + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.52 + P.53 + NP + D.8.


Table 7a: General government expenditure and revenue targets

General government (S. 13) ESACode

2017 2018

- in % of GDP -

1. Total revenue TR 45.2 44 ¾

of which:

1.1. Taxes on production and imports D.2 10.6 10 ½

1.2. Current taxes on income, wealth, etc D.5 12.9 13 ¼

1.3. Capital taxes D.91 0.0 0

1.4. Social contributions D.61 16.8 16 ¾

1.5. Property income D.4 0.5 ½

1.6. Other1) 4.4 4

p.m.: Tax burden (D.2+D.5+D.61+D.91-D.995)2)

40.3 40 ¼

2. Total expenditure TE3) 43.9 43 ¾

of which:

2.1. Compensation of employees D.1 7.6 7 ½

2.2. Intermediate consumption P.2 4.8 4 ¾

2.3. Social payments D.62 + D.632 24.0 23 ¾

of which: Unemployment benefits4) 1.5 1 ¼

2.4. Interest expenditure D.41 1.1 1

2.5. Subsidies D.3 0.8 ¾

2.6. Gross fixed capital formation P.51 2.2 2 ¼

2.7. Capital transfers D.91 1.3 1 ¼

2.8. Other5) 2.2 2 ¼

1) P.11 + P.12 + P.131 + D.39rec + D.7rec + D.9rec (other than D.91rec).2) Including those collected by the EU and including an adjustment for uncollected taxes and social contributions (D.995), if appropriate.3) TR - TE = B.9.4) Includes social benefits other than social transfers in kind (D.62) and social transfers in kind via market producers (D.632) related to unemployment benefits.5) D.29pay + D.4pay (other than D.41pay) + D.5pay + D.7pay + P.52 + P.53 + NP + D.8.



Table 7b: Amounts to be excluded from the expenditure benchmark

2016 2016 2017 2018

€bn - in % of GDP -

1. Expenditure on EU programmes fully matched by EU funds revenue 5.0 0.2 0.1 0

2. Cyclical unemployment bene�t expenditure 2.1 0.1 0.0 0

3. Effect of discretionary revenue measures -4.7 -0.2 0.0 - ¼

4. Revenue changes mandated by law 0.0 0.0 0.0 0


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Table 9: Divergence from April 2018 Stability Programme

ESACode 2016 2017 2018

Target general government net lending/net borrowing (% of GDP) B.9

Stability Programme - April 2018 0.8 1.1 1

Draft Budgetary Plan - Update 1.0 1.3 1 ¼

Difference 0.2 0.1 ¼ General government net lending/net borrowing projection at unchanged policies (% of GDP)

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Figures for the projection period are rounded to quarter percentage points.


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mm

enda

tions

(CSR

)

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

shou

ld ta

ke a

ctio

n in

20

17 a

nd 2

018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

e

Reco

mm

enda

tion

1: P

ublic

in

vest

men

t and

com

peti

tion

Whi

le re

spec

ting

the

med

i-um

-ter

m o

bjec

tive,

use

ªsc

al a

nd

stru

ctur

al p

olic

ies

to s

uppo

rt

pote

ntia

l gro

wth

and

dom

estic

de

man

d as

wel

l as

to a

chie

ve

a su

stai

ned

upw

ard

tren

d in

in

vest

men

t

Acc

eler

ate

publ

ic in

vest

men

t at

all l

evel

s of

gov

ernm

ent,

espe

-ci

ally

in e

duca

tion,

rese

arch

and

in

nova

tion

2017

fede

ral b

udge

tA

roun

d €3

4.0

billi

on w

ere

spen

t on

inve

stm

ent i

n th

e 20

17 b

udge

t yea

r (+

2.5

% o

n 20

16).

In p

artic

ular

, exp

endi

ture

on

mat

eria

l ass

ets

rose

con

side

rabl

y,

at 1

1.5%

. Exp

endi

ture

on

educ

atio

n an

d re

sear

ch ro

se b

y ro

ughl

y 6.

3% (a

ppro

x.

€1.3

bill

ion)

to a

ppro

x. €

21.9

bill

ion.

2017

Bud

get A

ct

(Hau

shal

tsge

setz

) in

forc

e si

nce

1 Ja

nuar

y 20

17.

2018

fede

ral b

udge

t (s

econ

d dr

aft)

The

seco

nd g

over

nmen

t dra

ft fo

r the

201

8 fe

dera

l bud

get a

gain

fore

sees

a

budg

et w

ithou

t new

bor

row

ing.

The

impl

emen

tatio

n of

ªrs

t prio

rity

mea

sure

s fr

om th

e co

aliti

on a

gree

men

t is

alre

ady

envi

sage

d fo

r 201

8, in

clud

ing

mea

sure

s fo

r res

earc

h an

d de

velo

pmen

t. O

vera

ll, th

e fu

ture

-orie

nted

are

as o

f edu

catio

n,

scie

nce

and

rese

arch

con

tinue

to b

e ac

cord

ed h

igh

prio

rity,

with

roug

hly

€22.

9 bi

llion

ear

mar

ked

for e

duca

tion

and

rese

arch

spe

ndin

g (a

ctua

l ªgu

re fo

r 201

7:

appr

ox. €

21.9

bill

ion)

.

Fede

ral i

nves

tmen

t exp

endi

ture

will

incr

ease

to €

37.0

bill

ion

(+ €

3.0

billi

on

appr

ox. o

n ac

tual

ªgu

res

for 2

017)

. Inv

estm

ent i

n tr

ansp

ort a

lone

will

be

rais

ed

to €

14.1

bill

ion

in 2

018.

Cabi

net d

ecis

ion

of

2 M

ay 2

018

(cha

nges

po

ssib

le in

the

parli

a-m

enta

ry p

roce

ss).

Prom

otio

n of

inve

st-

men

t by

ªnan

cial

ly

wea

k m

unic

ipal

ities

The

volu

me

of th

e M

unic

ipal

Inve

stm

ent P

rom

otio

n Fu

nd h

as b

een

doub

led

to

€7 b

illio

n an

d th

e M

unic

ipal

Inve

stm

ent P

rom

otio

n A

ct (K

omm

unal

inve

stiti

ons-

förd

erun

gsge

setz

) has

bee

n am

ende

d to

incl

ude

a ne

w fu

ndin

g ch

apte

r.

With

this

, the

Fed

erat

ion

is p

rovi

ding

new

ªna

ncia

l ass

ista

nce

amou

ntin

g to

€3

.5 b

illio

n fo

r the

mod

erni

satio

n, re

build

ing

and

expa

nsio

n of

sch

ool b

uild

ings

in

ªna

ncia

lly w

eak

mun

icip

aliti

es fr

om 1

July

201

7 th

roug

h to

the

end

of 2

022.

In

this

con

text

, the

equ

ipm

ent r

equi

red

for t

he p

rope

r fun

ctio

ning

of t

he b

uild

-in

gs a

nd n

eces

sary

com

plem

enta

ry in

fras

truc

ture

mea

sure

s, in

clud

ing

mea

sure

s de

sign

ed to

ens

ure

that

dig

ital r

equi

rem

ents

for s

choo

l bui

ldin

gs a

re m

et, a

re

also

elig

ible

for f

undi

ng s

uppo

rt.

The

ªrst

fund

ing

prog

ram

me

whi

ch w

as la

unch

ed in

mid

-201

5 al

so w

ith a

bu

dget

of €

3.5

billi

on w

ill s

till b

e av

aila

ble

to ª

nanc

ially

wea

k m

unic

ipal

ities

unt

il th

e en

d of

202

0 fo

r inf

rast

ruct

ure

inve

stm

ent i

n a

varie

ty o

f are

as, r

angi

ng fr

om

nois

e co

ntro

l to

hosp

itals

and

urb

an d

evel

opm

ent m

easu

res.

Acc

ordi

ng to

the

over

view

s pr

esen

ted

by th

e Lä

nder

on

30 Ju

ne 2

017,

app

rox.

87%

of t

he fu

nds

prov

ided

by

the

fede

ral g

over

nmen

t for

this

pro

gram

me

are

alre

ady

earm

arke

d fo

r spe

ciªc

inve

stm

ent m

easu

res.

Am

endm

ent t

o th

e A

ct to

Est

ablis

h a

Spec

ial F

und,

the

"Mun

icip

al In

vest

men

t Pr

omot

ion

Fund

" (G

eset

z zu

r Err

icht

ung

eine

s Son

derv

erm

ögen

s "K

omm

unal

inve

sti-

tions

förd

erun

gsfo

nds)

" an

d am

endm

ent t

o th

e M

unic

ipal

Inve

stm

ent

Prom

otio

n A

ct in

forc

e si

nce

18 A

ugus

t 201

7 (A

rtic

les

6 an

d 7

of th

e A

ct o

n th

e Re

stru

c-tu

ring

of th

e N

atio

nal

Fisc

al E

qual

isat

ion

Syst

em fr

om 2

020

Ta

ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

shou

ld ta

ke a

ctio

n in

20

17 a

nd 2

018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

e

Reco

mm

enda

tion

1: P

ublic

in

vest

men

t and

com

peti

tion

The

Länd

er s

hare

of p

ublic

fund

ing

as d

eªne

d un

der S

ectio

n 6

(1) o

f the

M

unic

ipal

Inve

stm

ent P

rom

otio

n A

ct m

ay n

ot b

e re

plac

ed b

y EU

fund

s. In

ad

ditio

n, th

e fu

nds

prov

ided

by

the

fede

ral g

over

nmen

t may

not

be

used

to

co-ª

nanc

e pr

ogra

mm

es s

uppo

rted

by

EU fu

nds.

and

on th

e M

odiª

-ca

tion

of B

udge

tary

Pr

ovis

ions

(Ges

etz

zur N

eure

gelu

ng d

es

bund

esst

aatli

chen

Fi

nanz

ausg

leic

hssy

s-te

ms a

b de

m Ja

hr 2

020

und

zur Ä

nder

ung

haus

halts

rech

tlich

er

Vors

chrif

ten)

.

Rest

ruct

urin

g of

ªsc

al

rela

tions

bet

wee

n th

e Fe

dera

tion

and

the

Länd

er

Und

er th

e ne

w ru

les,

the

Länd

er w

ill re

ceiv

e to

tal r

elie

f of s

light

ly m

ore

than

€9.

7 bi

llion

ann

ually

from

202

0 on

war

ds. A

t the

sam

e tim

e, th

e re

form

will

mod

erni

se

the

fulª

lmen

t of r

espo

nsib

ilitie

s in

key

are

as in

the

fede

ral s

tate

and

str

engt

hen

the

role

of t

he F

eder

atio

n. T

he re

stru

ctur

ing

of ª

scal

rela

tions

bet

wee

n th

e Fe

dera

tion

and

the

Länd

er e

stab

lishe

s th

e fr

amew

ork

for p

erm

anen

tly s

ound

bu

dget

s at

Fed

eral

and

Län

der l

evel

and

for l

ong-

term

com

plia

nce

with

the

borr

owin

g lim

its. T

his

safe

guar

ds th

e ab

ility

of t

he fe

dera

l lev

els

to a

ct a

nd

stre

ngth

ens

the

auto

nom

y of

the

terr

itoria

l aut

horit

ies.

Not

leas

t, th

is a

lso

impr

oves

the

cond

ition

s fo

r sus

tain

able

inve

stm

ent w

hich

, in

a fe

dera

lly

stru

ctur

ed s

tate

, is

the

resp

onsi

bilit

y of

the

terr

itoria

l aut

horit

ies

com

pete

nt in

ea

ch c

ase.

Act

to a

men

d th

e G

erm

an C

onst

itutio

n (G

eset

z zu

r Änd

erun

g de

s Gru

ndge

setz

es)

(pro

mul

gate

d on

19

July

201

7)

Act

on

the

Rest

ruc-

turin

g of

the

Nat

iona

l Fi

scal

Equ

alis

atio

n Sy

stem

from

202

0 an

d on

the

Mod

iªca

tion

of

Budg

etar

y Pr

ovis

ions

(p

rom

ulga

ted

on

17 A

ugus

t 201

7).

Com

plia

nce

with

th

e m

ediu

m-t

erm

ob

ject

ive

(MTO

)

Sinc

e 20

12, G

erm

any

has

been

com

plyi

ng w

ith th

e m

ediu

m-t

erm

bud

geta

ry

obje

ctiv

e of

hav

ing

a st

ruct

ural

nat

iona

l deª

cit n

o gr

eate

r tha

n 0.

5 %

of G

DP

and

will

als

o be

abl

e to

com

ply

with

the

obje

ctiv

e in

the

com

ing

year

s (fo

reca

st

perio

d th

roug

h to

202

2). P

ublic

inve

stm

ent i

s ex

pect

ed to

incr

ease

by

an a

vera

ge

of 5

% p

er a

nnum

(in

nom

inal

term

s) d

urin

g th

e fo

reca

st p

erio

d.


ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

shou

ld ta

ke a

ctio

n in

20

17 a

nd 2

018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

e

Reco

mm

enda

tion

1: P

ublic

in

vest

men

t and

com

peti

tion

Add

ress

cap

acity

and

pla

nnin

g co

nstr

aint

s fo

r inf

rast

ruct

ure

inve

stm

ents

Infr

astr

uctu

re

com

pany

for f

eder

al

mot

orw

ays

and

othe

r fe

dera

l tru

nk ro

ads

• Act

to a

men

d th

e G

erm

an C

onst

itutio

n

• Act

on

the

Re-

stru

ctur

ing

of th

e N

atio

nal F

isca

l Eq

ualis

atio

n Sy

stem

fr

om 2

020

and

on

the

Mod

iªca

tion

of

Budg

etar

y Pr

ovis

ions

The

Fede

ratio

n w

ill d

eleg

ate

resp

onsi

bilit

y fo

r the

pla

nnin

g, c

onst

ruct

ion,

ope

ra-

tion,

mai

nten

ance

, fun

ding

and

ªna

ncia

l man

agem

ent o

f the

fede

ral m

otor

way

s (a

nd fe

dera

l tru

nk ro

ads

whe

re a

pplic

able

) to

a co

mpa

ny u

nder

priv

ate

law

("I

nfra

stru

ctur

e co

mpa

ny fo

r aut

obah

ns a

nd o

ther

fede

ral t

runk

road

s").

Both

the

road

s an

d th

e co

mpa

ny a

re th

e in

alie

nabl

e pr

oper

ty o

f the

Fed

erat

ion.

Th

e ai

m o

f thi

s re

stru

ctur

ing

is to

reso

lve

issu

es re

late

d to

the

way

con

trac

ts a

re

curr

ently

man

aged

, for

exa

mpl

e by

con

solid

atin

g co

mpe

tenc

ies

and

resp

onsi

bili-

ties.

Inve

stm

ent i

n th

e ex

pans

ion

and

mai

nten

ance

of t

he fe

dera

l aut

obah

ns is

to

be im

plem

ente

d m

ore

quic

kly

and

efªc

ient

ly in

the

futu

re.

Act

s en

tere

d in

to fo

rce

on 2

0 Ju

ly 2

017

and

18

Aug

ust 2

017.

Lim

ited

com

pany

(in

the

form

of a

Gm

bH)

expe

cted

to b

e es

tabl

ishe

d in

sum

mer

20

18 (n

o la

ter t

han

two

mon

ths

afte

r the

pr

omul

gatio

n of

the

2018

Bud

get A

ct).

Part

ners

chaf

t D

euts

chla

nd –

Ber

ater

de

r öff

entli

chen

Han

d G

mbH

The

publ

ic c

onsu

ltanc

y "P

artn

ersc

haft

Deu

tsch

land

– B

erat

er d

er ö

ffen

tlich

en

Han

d G

mbH

" (PD

) will

pro

vide

pro

cure

men

t-ne

utra

l adv

ice

to p

ublic

-sec

tor

cont

ract

ing

auth

oriti

es in

the

impl

emen

tatio

n of

inve

stm

ent p

roje

cts.

The

aim

is

to e

nabl

e in

vest

men

ts to

be

impl

emen

ted

in a

fast

er a

nd m

ore

cost

-eff

ectiv

e m

anne

r and

clo

ser t

o th

e de

ªned

sch

edul

e. P

D o

ffer

s m

unic

ipal

ities

a s

peci

al

advi

sory

pro

gram

me

to a

ddre

ss th

e ca

paci

ty a

nd p

lann

ing

bott

lene

cks

the

mun

icip

aliti

es a

re fa

cing

.

Com

pany

form

m

odiª

ed w

ith e

ffec

t fr

om 7

Dec

embe

r 20

16, n

ew a

dvis

ory

prog

ram

me

bein

g im

plem

ente

d.

Furt

her i

mpr

ove

the

efªc

ienc

y an

d in

vest

men

t-fr

iend

lines

s of

th

e ta

x sy

stem

Act

on

the

Mod

erni

-sa

tion

of th

e Ta

xatio

n Pr

oced

ure

(Ges

etz

zur

Mod

erni

sieru

ng d

es

Best

euer

ungs

verf

ah-

rens

)

The

Act

on

the

Mod

erni

satio

n of

the

Taxa

tion

Proc

edur

e re

nder

s th

e ta

x sy

stem

m

ore

efªc

ient

and

eco

nom

ical

by

mak

ing

grea

ter u

se o

f inf

orm

atio

n te

chno

logy

an

d by

ens

urin

g th

e m

ore

targ

eted

allo

catio

n of

reso

urce

s. Th

is e

nsur

es fa

ir an

d eq

ual t

ax e

nfor

cem

ent a

nd s

tren

gthe

ns G

erm

any’

s po

sitio

n as

a c

entr

e fo

r bu

sine

ss. T

he s

yste

m o

f tax

col

lect

ion

beco

mes

eas

ier,

fast

er a

nd m

ore

efªc

ient

.

The

maj

ority

of t

he

prov

isio

ns u

nder

the

Act

ent

ered

into

forc

e on

1 Ja

nuar

y 20

17

(Fed

eral

Law

Gaz

ette

20

16 I,

No.

35,

P.

167

9).

Ta

ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

shou

ld ta

ke a

ctio

n in

20

17 a

nd 2

018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

e

Reco

mm

enda

tion

1: P

ublic

in

vest

men

t and

com

peti

tion

Act

to C

omba

t H

arm

ful T

ax P

rac-

tices

rela

ting

to th

e Tr

ansf

er o

f Rig

hts

(Ges

etz

gege

n sc

hädl

i-ch

e St

euer

prak

tiken

im

Zusa

mm

enha

ng m

it Re

chte

über

lass

unge

n)

The

Act

intr

oduc

ed a

new

Sec

tion

4j in

the

Inco

me

Tax

Act

(Ein

kom

men

steu

er-

gese

tz) w

ith e

ffec

t fro

m 2

018.

Und

er th

e ne

w p

rovi

sion

s, ex

pens

es in

con

nect

ion

with

the

licen

sing

of r

ight

s to

a re

late

d pa

rty

as d

eªne

d in

Sec

tion

1 (2

) of t

he

Fore

ign

Tax

Rela

tions

Act

(Auß

enst

euer

gese

tz) m

ay n

ot b

e de

duct

ed, o

r may

onl

y be

ded

ucte

d in

par

t, if

the

reci

pien

t of t

he p

aym

ent i

s no

t tax

ed fo

r thi

s pa

ymen

t, or

is o

nly

taxe

d at

a lo

w ra

te, o

n ac

coun

t of a

pre

fere

ntia

l tre

atm

ent r

egim

e (k

now

n as

"IP

boxe

s", "

licen

se b

oxes

" or "

pate

nt b

oxes

). Pr

efer

entia

l tre

atm

ent

regi

mes

that

mee

t the

sub

stan

tial a

ctiv

ity re

quire

men

t and

ther

efor

e co

mpl

y w

ith th

e "n

exus

app

roac

h" a

gree

d by

the

OEC

D a

nd G

20 a

re n

ot d

eem

ed h

arm

ful

and

ther

efor

e do

not

fall

with

in th

e sc

ope

of th

is ru

le.

In a

dditi

on, t

he th

resh

old

for i

mm

edia

te d

epre

ciat

ion

of lo

w-v

alue

ass

ets

has

been

rais

ed fr

om €

410

to €

800,

the

low

er th

resh

old

for t

he fo

rmat

ion

of a

co

llect

ive

item

has

bee

n ra

ised

from

€15

0 to

€25

0 an

d th

e ta

x ex

empt

ion

for t

he

INV

EST

gran

t (Se

ctio

n 3,

Num

ber 7

1 of

the

Inco

me

Tax

Act

) has

bee

n ad

apte

d to

th

e ne

w fu

ndin

g gu

idel

ines

that

app

ly w

ith e

ffec

t fro

m 1

Janu

ary

2017

.

Sect

ion

4j o

f the

In

com

e Ta

x A

ct is

ef

fect

ive

for e

xpen

ses

incu

rred

aft

er

31 D

ecem

ber 2

017.

Act

to R

efor

m

Inve

stm

ent T

axat

ion

(Ges

etz

zur R

efor

m d

er

Inve

stm

entb

este

ue-

rung

)

The

refo

rm o

f inv

estm

ent t

axat

ion

purs

ues

the

follo

win

g go

als

in p

artic

ular

:

• El

imin

ate

risks

rela

ting

to E

U la

w.

• Pr

even

t ind

ivid

ual a

ggre

ssiv

e ta

x ar

rang

emen

ts a

nd re

duce

the

over

all

susc

eptib

ility

of i

nves

tmen

t tax

atio

n la

w to

cre

ativ

e ta

x st

ruct

ures

.•

Cons

ider

ably

redu

ce th

e ef

fort

for d

eter

min

ing

the

tax

asse

ssm

ent b

asis

on

the

part

of t

he b

usin

ess

com

mun

ity a

nd p

rivat

e in

divi

dual

s on

the

one

hand

, an

d th

e ad

min

istr

ativ

e bu

rden

of t

ax a

dmin

istr

atio

n on

the

othe

r, in

mas

s ta

x pr

oced

ures

for m

utua

l inv

estm

ent f

unds

and

thei

r inv

esto

rs.

• Ru

le o

ut th

e av

oida

nce

of ta

xatio

n of

div

iden

ds th

roug

h di

vide

nd-a

rbitr

age

tran

sact

ions

(cum

-cum

dea

ls).

In fo

rce

sinc

e

27 Ju

ly 2

016.

Rule

s es

sent

ially

app

ly

from

1 Ja

nuar

y 20

18.


ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

shou

ld ta

ke a

ctio

n in

20

17 a

nd 2

018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

e

Reco

mm

enda

tion

1: P

ublic

in

vest

men

t and

com

peti

tion

Act

to C

omba

t H

arm

ful T

ax P

rac-

tices

rela

ting

to th

e Tr

ansf

er o

f Rig

hts

(Ges

etz

gege

n sc

hädl

i-ch

e St

euer

prak

tiken

im

Zusa

mm

enha

ng m

it Re

chte

über

lass

unge

n)

The

Act

intr

oduc

ed a

new

Sec

tion

4j in

the

Inco

me

Tax

Act

(Ein

kom

men

steu

er-

gese

tz) w

ith e

ffec

t fro

m 2

018.

Und

er th

e ne

w p

rovi

sion

s, ex

pens

es in

con

nect

ion

with

the

licen

sing

of r

ight

s to

a re

late

d pa

rty

as d

eªne

d in

Sec

tion

1 (2

) of t

he

Fore

ign

Tax

Rela

tions

Act

(Auß

enst

euer

gese

tz) m

ay n

ot b

e de

duct

ed, o

r may

onl

y be

ded

ucte

d in

par

t, if

the

reci

pien

t of t

he p

aym

ent i

s no

t tax

ed fo

r thi

s pa

ymen

t, or

is o

nly

taxe

d at

a lo

w ra

te, o

n ac

coun

t of a

pre

fere

ntia

l tre

atm

ent r

egim

e (k

now

n as

"IP

boxe

s", "

licen

se b

oxes

" or "

pate

nt b

oxes

). Pr

efer

entia

l tre

atm

ent

regi

mes

that

mee

t the

sub

stan

tial a

ctiv

ity re

quire

men

t and

ther

efor

e co

mpl

y w

ith th

e "n

exus

app

roac

h" a

gree

d by

the

OEC

D a

nd G

20 a

re n

ot d

eem

ed h

arm

ful

and

ther

efor

e do

not

fall

with

in th

e sc

ope

of th

is ru

le.

In a

dditi

on, t

he th

resh

old

for i

mm

edia

te d

epre

ciat

ion

of lo

w-v

alue

ass

ets

has

been

rais

ed fr

om €

410

to €

800,

the

low

er th

resh

old

for t

he fo

rmat

ion

of a

co

llect

ive

item

has

bee

n ra

ised

from

€15

0 to

€25

0 an

d th

e ta

x ex

empt

ion

for t

he

INV

EST

gran

t (Se

ctio

n 3,

Num

ber 7

1 of

the

Inco

me

Tax

Act

) has

bee

n ad

apte

d to

th

e ne

w fu

ndin

g gu

idel

ines

that

app

ly w

ith e

ffec

t fro

m 1

Janu

ary

2017

.

Sect

ion

4j o

f the

In

com

e Ta

x A

ct is

ef

fect

ive

for e

xpen

ses

incu

rred

aft

er

31 D

ecem

ber 2

017.

Act

to R

efor

m

Inve

stm

ent T

axat

ion

(Ges

etz

zur R

efor

m d

er

Inve

stm

entb

este

ue-

rung

)

The

refo

rm o

f inv

estm

ent t

axat

ion

purs

ues

the

follo

win

g go

als

in p

artic

ular

:

• El

imin

ate

risks

rela

ting

to E

U la

w.

• Pr

even

t ind

ivid

ual a

ggre

ssiv

e ta

x ar

rang

emen

ts a

nd re

duce

the

over

all

susc

eptib

ility

of i

nves

tmen

t tax

atio

n la

w to

cre

ativ

e ta

x st

ruct

ures

.•

Cons

ider

ably

redu

ce th

e ef

fort

for d

eter

min

ing

the

tax

asse

ssm

ent b

asis

on

the

part

of t

he b

usin

ess

com

mun

ity a

nd p

rivat

e in

divi

dual

s on

the

one

hand

, an

d th

e ad

min

istr

ativ

e bu

rden

of t

ax a

dmin

istr

atio

n on

the

othe

r, in

mas

s ta

x pr

oced

ures

for m

utua

l inv

estm

ent f

unds

and

thei

r inv

esto

rs.

• Ru

le o

ut th

e av

oida

nce

of ta

xatio

n of

div

iden

ds th

roug

h di

vide

nd-a

rbitr

age

tran

sact

ions

(cum

-cum

dea

ls).

In fo

rce

sinc

e

27 Ju

ly 2

016.

Rule

s es

sent

ially

app

ly

from

1 Ja

nuar

y 20

18.

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

shou

ld ta

ke a

ctio

n in

20

17 a

nd 2

018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

e

Reco

mm

enda

tion

1: P

ublic

in

vest

men

t and

com

peti

tion

Stim

ulat

e co

mpe

titio

n in

bus

ines

s se

rvic

es a

nd re

gula

ted

prof

essi

ons

Exam

ine

the

refo

rm

reco

mm

enda

tions

of

the

Euro

pean

Co

mm

issi

on fo

r re

gula

tion

in

prof

essi

onal

ser

vice

s.

The

fede

ral g

over

nmen

t is

taki

ng th

e Eu

rope

an C

omm

issi

on’s

reco

mm

enda

tions

fo

r reg

ulat

ion

in p

rofe

ssio

nal s

ervi

ces

as a

n op

port

unity

to a

gain

exa

min

e th

e re

gula

tions

in p

rofe

ssio

nal s

ervi

ces

addr

esse

d in

the

com

mun

icat

ion.

The

fo

llow

ing

reco

mm

enda

tions

hav

e be

en im

plem

ente

d so

far:

Impl

emen

tatio

n of

Dire

ctiv

e 20

13/5

5/EU

for p

aten

t att

orne

ys; t

he re

com

men

datio

n re

gard

ing

tran

spar

ency

and

lega

l cer

tain

ty in

the

prov

isio

n of

tax

advi

sory

ser

vice

s by

bu

sine

sses

est

ablis

hed

in o

ther

Mem

ber S

tate

s ha

s be

en im

plem

ente

d in

the

amen

ded

Act

to C

omba

t Tax

Avo

idan

ce (S

teue

rum

gehu

ngsb

ekäm

pfun

gsge

setz

) of

23

June

201

7; d

ecis

ion

not t

o re

gula

te th

e re

al e

stat

e ag

ent p

rofe

ssio

n (o

nly

intr

oduc

tion

of a

requ

irem

ent f

or re

gula

r con

tinui

ng tr

aini

ng).

Revi

ew in

this

le

gisl

ativ

e te

rm

with

due

rega

rd

to th

e pr

oces

s fo

r tr

acki

ng th

e re

form

re

com

men

datio

ns a

t EU

leve

l.

Fee

scal

e or

dina

nce

for t

ax a

dvis

ers

and

the

stat

utor

y fe

e sc

hedu

le fo

r ar

chite

cts

and

engi

neer

s

The

fede

ral g

over

nmen

t als

o ta

kes

acco

unt o

f the

fact

that

the

Euro

pean

Co

mm

issi

on o

pene

d an

infr

inge

men

t pro

cedu

re a

gain

st G

erm

any

on 1

8 Ju

ne

2015

ove

r the

bin

ding

min

imum

fees

set

by

the

fee

scal

e or

dina

nce

for t

ax

advi

sers

and

the

stat

utor

y fe

e sc

hedu

le fo

r arc

hite

cts

and

engi

neer

s. Th

e ru

les

gove

rnin

g th

e fe

e sc

ale

ordi

nanc

e fo

r tax

adv

iser

s ha

ve s

ince

bee

n m

odifi

ed.

How

ever

, with

rega

rd to

the

stat

utor

y fe

e sc

hedu

le fo

r arc

hite

cts

and

engi

neer

s, w

hich

alre

ady

only

app

lies

to d

omes

tic s

ervi

ce p

rovi

ders

, the

Eur

opea

n Co

mm

issi

on h

as re

ferr

ed th

e ca

se to

the

Euro

pean

Cou

rt o

f Jus

tice

(ECJ

). Th

e ap

plic

atio

n w

as s

erve

d on

Ger

man

y on

28

June

201

7. In

its

resp

onse

of 7

Se

ptem

ber 2

017,

the

fede

ral g

over

nmen

t sta

ted

that

it c

anno

t rec

ogni

ze th

at

the

free

dom

of e

stab

lishm

ent h

as b

een

viol

ated

and

that

the

sett

ing

of fe

e ra

tes

is ju

stifi

ed fo

r rea

sons

of c

onsu

mer

pro

tect

ion

and

qual

ity a

ssur

ance

, am

ongs

t ot

hers

. Aft

er th

e cl

ose

of th

e w

ritte

n pr

oced

ure,

on

7 M

ay 2

018

the

fede

ral

gove

rnm

ent r

eque

sted

that

an

oral

hea

ring

be h

eld

befo

re th

e Eu

rope

an C

ourt

of

Just

ice.

The

rule

s fo

r the

fe

e sc

ale

ordi

nanc

e fo

r tax

adv

iser

s w

ere

amen

ded

by

Art

icle

9 o

f the

Thi

rd

Ord

inan

ce to

Am

end

Tax

Regu

latio

ns

(Drit

te V

eror

dnun

g zu

r Än

deru

ng st

euer

liche

r Ve

rord

nung

en) o

f

18 Ju

ly 2

016

(Fed

eral

La

w G

azet

te I

S. 1

722)

.

Ta

ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

take

act

ion

in 2

017

and

2018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

eRe

com

men

dati

on 2

: La

bour

par

tici

pati

on a

nd la

bour

m

arke

t

Redu

ce d

isin

cent

ives

to w

ork

fo

r sec

ond

earn

ers

Act

to C

omba

t Tax

Av

oida

nce

(Ste

uer-

umge

hung

sbek

ämp-

fung

sges

etz)

of

23 Ju

ne 2

017

In th

e ar

ea o

f tax

atio

n, fu

rthe

r eff

orts

are

bei

ng m

ade

to ra

ise

awar

enes

s of

the

fact

or-b

ased

met

hod

(Fak

torv

erfa

hren

) in

tax

brac

ket I

V. A

s th

e fa

ctor

-bas

ed

met

hod

has

the

effe

ct o

f sha

ring

relie

f bet

wee

n bo

th e

arne

rs, t

his

supp

orts

eff

orts

to

incr

ease

the

supp

ly o

f lab

our.

With

eff

ect f

rom

1 Ja

nuar

y 20

19, t

he fa

ctor

can

be

set,

on re

ques

t, fo

r tw

o ye

ars

inst

ead

of ju

st fo

r one

yea

r. Fr

om 2

018,

the

IV/I

V ta

x br

acke

t com

bina

tion

will

bec

ome

the

stan

dard

tax

brac

ket f

or m

arrie

d co

uple

s an

d it

will

be

poss

ible

to c

hang

e fr

om th

e op

tiona

l III

/V ta

x br

acke

t com

bina

tion

to th

e IV

/IV

tax

brac

ket c

ombi

natio

n at

the

requ

est o

f onl

y on

e sp

ouse

.

Ente

red

into

forc

e on

1

Janu

ary

2018

(F

eder

al L

aw G

azet

te I

S. 1

682)

.

Pay

Tran

spar

ency

Act

(E

ntge

lttra

nspa

renz

-ge

setz

)

Intr

oduc

tion

of th

e in

divi

dual

righ

t to

info

rmat

ion

and

of re

port

ing

requ

irem

ents

fo

r lar

ge c

ompa

nies

to a

llow

for g

reat

er tr

ansp

aren

cy o

n ge

nder

-spe

ciªc

pay

st

ruct

ures

. The

aim

is to

hel

p en

forc

e th

e pr

inci

ple

of e

qual

pay

for e

qual

or

equi

vale

nt w

ork.

Ente

red

into

forc

e on

6

July

201

7.

Faci

litat

e tr

ansi

tions

to

stan

dard

em

ploy

men

tA

ct A

men

ding

the

Tem

pora

ry E

m-

ploy

men

t Act

and

ot

her A

cts

(Ges

etz

zur Ä

nder

ung

des

Arbe

itneh

mer

über

-la

ssun

gsge

setz

es u

nd

ande

rer G

eset

ze)

The

over

all d

evel

opm

ent i

n G

erm

any

in re

cent

yea

rs h

as s

how

n a

posi

tive

tren

d:

Betw

een

June

201

0 an

d Ju

ne 2

016,

em

ploy

men

t req

uirin

g co

mpu

lsor

y so

cial

se

curit

y pa

ymen

ts in

crea

sed

by a

ppro

xim

atel

y 10

%, w

hile

the

num

ber o

f wor

kers

ex

clus

ivel

y in

mar

gina

l em

ploy

men

t fel

l by

4.8%

.

The

fede

ral g

over

nmen

t alre

ady

put a

var

iety

of m

easu

res

in p

lace

in th

e 18

th

legi

slat

ive

term

to s

tren

gthe

n re

gula

r em

ploy

men

t con

trac

ts. F

or e

xam

ple,

Art

icle

61

1a o

f the

Civ

il Co

de n

ow d

eªne

s w

hat c

onst

itute

s a

cont

ract

of e

mpl

oym

ent.

This

pro

vide

s m

ore

lega

l cer

tain

ty in

dis

tingu

ishi

ng b

etw

een

empl

oyed

and

se

lf-em

ploy

ed a

ctiv

ities

. The

fede

ral g

over

nmen

t has

refo

cuse

d th

e te

mpo

rary

em

ploy

men

t sys

tem

mor

e on

its

core

func

tion

agai

n, p

artic

ular

ly b

y se

ttin

g a

max

imum

per

iod

for t

empo

rary

em

ploy

men

t to

norm

ally

be

18 m

onth

s. A

new

rule

re

gard

ing

pay

parit

y w

ith c

ompa

rabl

e re

gula

r sta

ff a

fter

nin

e m

onth

s is

a c

entr

al

elem

ent o

f the

legi

slat

ion.

Diff

eren

ces

in p

ay fo

r a lo

nger

per

iod

of ti

me

are

only

po

ssib

le if

a s

uppl

emen

tary

sec

tora

l col

lect

ive

agre

emen

t has

bee

n ag

reed

by

the

soci

al p

artn

ers.

In p

artic

ular

, aft

er a

per

iod

of 1

5 m

onth

s su

ch a

n ag

reem

ent

mus

t lea

d to

a le

vel o

f pay

deª

ned

in th

e co

llect

ive

agre

emen

t as

equi

vale

nt to

re

mun

erat

ion

in th

e sp

eciª

c se

ctor

. Fur

ther

mor

e, a

gra

dual

incr

ease

in th

e ra

te o

f pa

y m

ust c

omm

ence

aft

er ju

st 6

wee

ks. N

ot le

ast,

the

intr

oduc

tion

of th

e st

atut

ory

min

imum

wag

e ha

s al

so in

crea

sing

ly h

elpe

d to

tran

sfor

m m

argi

nal e

mpl

oym

ent

into

em

ploy

men

t req

uirin

g co

mpu

lsor

y so

cial

sec

urity

pay

men

ts.

Ente

red

into

forc

e on

1

Apr

il 20

17.


ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

take

act

ion

in 2

017

and

2018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

eRe

com

men

dati

on 2

: La

bour

par

tici

pati

on a

nd la

bour

m

arke

t

Redu

ce th

e hi

gh ta

x w

edge

for

low

-wag

e ea

rner

s;A

ct to

Impl

emen

t th

e A

men

dmen

ts to

th

e EU

Dire

ctiv

e on

M

utua

l Adm

inis

trat

ive

Ass

ista

nce

and

othe

r M

easu

res

to P

reve

nt

Base

Ero

sion

and

Pr

oªt S

hift

ing

of

20 D

ecem

ber 2

016

(Ges

etz

zur U

mse

tzun

g de

r Änd

erun

g de

r EU

-Am

tshi

lferic

htlin

ie

und

von

wei

tere

n M

aßna

hmen

geg

en

Gew

innk

ürzu

ngen

und

-v

erla

geru

ngen

)

For 2

017

and

2018

, the

fede

ral g

over

nmen

t has

take

n fu

rthe

r ste

ps to

incr

ease

th

e ba

sic

pers

onal

allo

wan

ce, t

he c

hild

allo

wan

ce, t

he c

hild

ben

eªt a

nd th

e ch

ild

supp

lem

ent a

nd to

com

bat ª

scal

dra

g (c

hang

e in

the

inco

me

tax

rate

to o

ffse

t th

e in

±atio

n ra

te o

f the

pre

cedi

ng y

ear).

The

Act

intr

oduc

ed a

dditi

onal

relie

f am

ount

ing

to o

ver €

6 bi

llion

in to

tal,

alm

ost €

4 bi

llion

of w

hich

are

for t

he n

ew

mea

sure

s in

201

8. T

oget

her w

ith th

e re

duce

d so

cial

sec

urity

con

trib

utio

ns (s

ee

belo

w),

thes

e m

easu

res

gene

rate

labo

ur-r

elat

ed re

lief i

n 20

18 o

f aro

und

0.2%

of

GD

P. T

he m

easu

res

in th

e ar

ea o

f inc

ome

tax

cont

ribut

e to

a fu

rthe

r im

prov

e-m

ent i

n in

cent

ives

to w

ork

and

purc

hasi

ng p

ower

. Ove

rall,

the

relie

f int

rodu

ced

in th

e 18

th le

gisl

ativ

e te

rm a

mou

nts

to o

ver €

11 b

illio

n a

year

. Par

ticul

arly

with

re

gard

to th

e pr

oced

ure

to re

duce

ªsc

al d

rag,

the

tax

mea

sure

s go

bey

ond

wha

t w

as re

quire

d to

com

ply

with

con

stitu

tiona

l law

.

In re

lativ

e te

rms,

tax-

paye

rs o

n a

low

er in

com

e ar

e gr

ante

d fa

r mor

e re

lief t

han

tax-

paye

rs o

n hi

gher

inco

mes

.

Ente

red

into

forc

e on

1

Janu

ary

2017

and

1

Janu

ary

2018

(F

eder

al L

aw G

azet

te I

P. 3

000)

.

2018

Ord

inan

ce o

n th

e Co

ntrib

utio

n Ra

te

for S

tatu

tory

Pen

sion

In

sura

nce

(Bei

trag

s-sa

tzve

rord

nung

201

8 fü

r GRV

) and

redu

ctio

n in

the

addi

tiona

l co

ntrib

utio

n ra

te

for s

tatu

tory

hea

lth

insu

ranc

e

Plan

ned

Act t

o Re

lieve

th

e Co

ntrib

utio

n Bu

rden

on

Part

ies

Insu

red

unde

r the

St

atut

ory

The

cont

ribut

ion

rate

to th

e st

atut

ory

pens

ion

insu

ranc

e sy

stem

dro

pped

by

0.1

perc

enta

ge p

oint

s to

18.

6% w

ith e

ffec

t fro

m 1

Janu

ary

2018

. Als

o, th

e ar

ithm

eti-

cal a

vera

ge a

dditi

onal

con

trib

utio

n ra

te o

f the

sta

tuto

ry h

ealth

insu

ranc

e fu

nds

fell

to 1

.08%

on

1 Ja

nuar

y 20

18.

Calls

for a

redu

ced

cont

ribut

ion

burd

en in

the

area

of s

ocia

l sec

urity

mus

t co

nsid

er th

at s

ocia

l sec

urity

con

trib

utio

ns a

re c

ount

erba

lanc

ed b

y co

rres

pond

ing

bene

ªts

of th

e so

cial

pro

tect

ion

syst

ems -

som

e of

whi

ch a

re e

quiv

alen

t to

the

cont

ribut

ions

pai

d (p

rinci

ple

of e

quiv

alen

ce) -

and

that

it is

nec

essa

ry to

avo

id

redu

ced

entit

lem

ents

for l

ow-w

age

earn

ers

in p

artic

ular

. By

retu

rnin

g to

the

syst

em o

f equ

al ª

nanc

ing

of h

ealth

insu

ranc

e co

ntrib

utio

ns b

y em

ploy

ers

and

empl

oyee

s, th

e co

aliti

on a

gree

men

t mak

es p

rovi

sion

s fo

r rel

ief f

or w

orke

rs,

part

icul

arly

thos

e on

low

er a

nd m

ediu

m in

com

es. F

urth

erm

ore,

in o

ther

pro

po-

sed

legi

slat

ion

it is

pla

nned

to re

duce

the

cont

ribut

ion

rate

for u

nem

ploy

men

t in

sura

nce

from

3.0

% to

2.7

% a

nd to

relie

ve th

e so

cial

con

trib

utio

n bu

rden

on

low

-wag

e ea

rner

s (e

xpan

sion

of r

ules

for m

idi-

jobs

).

Cabi

net d

ecis

ion

(sta

tuto

ry p

ensi

on

insu

ranc

e):

22 N

ovem

ber 2

017.

Ann

ounc

emen

t by

Fede

ral M

inis

try

of

Hea

lth (s

tatu

tory

he

alth

insu

ranc

e):

23 O

ctob

er 2

017.

Ta

ble

10:

cont

inua

tion

The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

take

act

ion

in 2

017

and

2018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

eRe

com

men

dati

on 2

: La

bour

par

tici

pati

on a

nd la

bour

m

arke

t

Hea

lth In

sura

nce

Syst

em (G

eset

z zu

r Be

itrag

sent

last

ung

der V

ersic

hert

en in

der

G

eset

zlic

hen

Kran

ken-

vers

iche

rung

)

Irre

spec

tive

of th

is, l

imiti

ng th

e la

bour

-rel

ated

tax

wed

ge in

a m

anne

r tha

t pr

omot

es g

row

th a

nd e

mpl

oym

ent r

emai

ns a

prim

ary

over

all p

olic

y go

al o

f the

fe

dera

l gov

ernm

ent.

In th

e in

tere

st o

f em

ploy

ees

and

empl

oyer

s, th

e fe

dera

l go

vern

men

t see

ks to

kee

p so

cial

sec

urity

con

trib

utio

ns s

tabl

e at

und

er 4

0% o

f in

com

e lia

ble

to s

ocia

l sec

urity

con

trib

utio

ns.

Act

to R

elie

ve th

e Co

ntrib

utio

n Bu

rden

on

Par

ties

Insu

red

unde

r the

Sta

tuto

ry

Hea

lth In

sura

nce

Syst

em p

lann

ed to

en

ter i

nto

forc

e at

the

end

of 2

018.

Crea

te c

ondi

tions

to p

rom

ote

high

er re

al w

age

grow

th, r

espe

ct-

ing

the

role

of t

he s

ocia

l par

tner

s

Ger

man

y ha

s a

syst

em o

f fre

e co

llect

ive

barg

aini

ng, i

.e. t

he p

artie

s to

free

col

lect

ive

barg

aini

ng a

re re

spon

sibl

e fo

r set

ting

wag

es a

nd s

alar

ies.

In p

rinci

ple,

the

stat

e do

es n

ot in

±uen

ce th

is.

Rega

rdin

g th

e de

velo

pmen

t of r

eal w

ages

in G

erm

any:

The

real

wag

e in

dex

of th

e Fe

dera

l Sta

tistic

al O

fªce

indi

cate

s an

ann

ual a

vera

ge in

crea

se o

f 1.3

% fo

r the

201

0-20

16 p

erio

d, b

ased

on

gros

s m

onth

ly w

ages

; in

2015

, gro

wth

in re

al w

ages

eve

n re

ache

d 2.

4% d

ue to

the

very

low

rate

of i

n±at

ion;

the

ªgur

e fo

r 201

6 w

as 1

.8%

.

Third

Ord

inan

ce o

n a

Min

imum

Wag

e fo

r Te

mpo

rary

Wor

kers

(D

ritte

Ver

ordn

ung

über

ein

e Lo

hnun

ter-

gren

ze in

der

Arb

eit-

nehm

erüb

erla

ssun

g)

The

Ord

inan

ce w

as e

nact

ed o

n th

e ba

sis

of a

pro

posa

l by

the

part

ies

to c

olle

ctiv

e ba

rgai

ning

agr

eem

ents

in th

e ªe

ld o

f tem

pora

ry e

mpl

oym

ent i

n ac

cord

ance

with

Se

ctio

n 3a

of t

he T

empo

rary

Em

ploy

men

t Act

(Arb

eitn

ehm

erüb

erla

ssun

gsge

setz

). Th

e m

inim

um w

ages

set

dow

n in

the

Ord

inan

ce a

pply

to a

ll em

ploy

ers

and

tem

pora

ry w

orke

rs fa

lling

with

in th

e sc

ope

of th

e O

rdin

ance

.

The

Ord

inan

ce e

nter

ed

into

forc

e on

1 Ju

ne

2017

(dat

e of

exp

iry:

31 D

ecem

ber 2

019)

.

Third

Ord

inan

ce o

n W

orki

ng C

ondi

tions

in

Lon

g-te

rm C

are

(P�e

gear

beits

bedi

n-gu

ngen

vero

rdnu

ng)

(Lon

g-te

rm C

are

Min

imum

Wag

e O

rdin

ance

)

The

Ord

inan

ce w

as e

nact

ed o

n th

e ba

sis

of a

pro

posa

l by

the

Long

-ter

m C

are

Min

imum

Wag

e Co

mm

issi

on, w

hich

com

pris

es tr

ade

unio

ns, e

mpl

oyer

s’ a

sso-

ciat

ions

and

repr

esen

tativ

es o

f pro

vide

rs a

nd re

cipi

ents

of c

hurc

h-ba

sed

soci

al

serv

ices

. The

new

Lon

g-te

rm C

are

Min

imum

Wag

e O

rdin

ance

deª

nes

a lo

wes

t w

age

leve

l for

a s

ecto

r in

whi

ch th

e w

orki

ng c

ondi

tions

are

oft

en n

ot c

over

ed b

y co

llect

ive

agre

emen

ts d

ue to

spe

cial

str

uctu

ral f

eatu

res;

this

low

est w

age

leve

l ap

plie

s to

all

prov

ider

s of

long

-ter

m c

are

and

wag

es m

ay n

ot fa

ll be

low

this

leve

l un

der a

ny c

ircum

stan

ces.

The

Ord

inan

ce e

nter

ed

into

forc

e on

1

Nov

embe

r 201

7 (d

ate

of e

xpiry

: 30

Apr

il 20

20).


The

Coun

cil o

f the

Eur

opea

n U

nion

reco

mm

ends

that

G

erm

any

take

act

ion

in 2

017

and

2018

to:

Act

ion

nam

e D

escr

ipti

on o

f act

ion

and

anti

cipa

ted

impa

ctSt

atus

and

sch

edul

eRe

com

men

dati

on 2

: La

bour

par

tici

pati

on a

nd la

bour

m

arke

t

Hea

lth In

sura

nce

Syst

em (G

eset

z zu

r Be

itrag

sent

last

ung

der V

ersic

hert

en in

der

G

eset

zlic

hen

Kran

ken-

vers

iche

rung

)

Irre

spec

tive

of th

is, l

imiti

ng th

e la

bour

-rel

ated

tax

wed

ge in

a m

anne

r tha

t pr

omot

es g

row

th a

nd e

mpl

oym

ent r

emai

ns a

prim

ary

over

all p

olic

y go

al o

f the

fe

dera

l gov

ernm

ent.

In th

e in

tere

st o

f em

ploy

ees

and

empl

oyer

s, th

e fe

dera

l go

vern

men

t see

ks to

kee

p so

cial

sec

urity

con

trib

utio

ns s

tabl

e at

und

er 4

0% o

f in

com

e lia

ble

to s

ocia

l sec

urity

con

trib

utio

ns.

Act

to R

elie

ve th

e Co

ntrib

utio

n Bu

rden

on

Par

ties

Insu

red

unde

r the

Sta

tuto

ry

Hea

lth In

sura

nce

Syst

em p

lann

ed to

en

ter i

nto

forc

e at

the

end

of 2

018.

Crea

te c

ondi

tions

to p

rom

ote

high

er re

al w

age

grow

th, r

espe

ct-

ing

the

role

of t

he s

ocia

l par

tner

s

Ger

man

y ha

s a

syst

em o

f fre

e co

llect

ive

barg

aini

ng, i

.e. t

he p

artie

s to

free

col

lect

ive

barg

aini

ng a

re re

spon

sibl

e fo

r set

ting

wag

es a

nd s

alar

ies.

In p

rinci

ple,

the

stat

e do

es n

ot in

±uen

ce th

is.

Rega

rdin

g th

e de

velo

pmen

t of r

eal w

ages

in G

erm

any:

The

real

wag

e in

dex

of th

e Fe

dera

l Sta

tistic

al O

fªce

indi

cate

s an

ann

ual a

vera

ge in

crea

se o

f 1.3

% fo

r the

201

0-20

16 p

erio

d, b

ased

on

gros

s m

onth

ly w

ages

; in

2015

, gro

wth

in re

al w

ages

eve

n re

ache

d 2.

4% d

ue to

the

very

low

rate

of i

n±at

ion;

the

ªgur

e fo

r 201

6 w

as 1

.8%

.

Third

Ord

inan

ce o

n a

Min

imum

Wag

e fo

r Te

mpo

rary

Wor

kers

(D

ritte

Ver

ordn

ung

über

ein

e Lo

hnun

ter-

gren

ze in

der

Arb

eit-

nehm

erüb

erla

ssun

g)

The

Ord

inan

ce w

as e

nact

ed o

n th

e ba

sis

of a

pro

posa

l by

the

part

ies

to c

olle

ctiv

e ba

rgai

ning

agr

eem

ents

in th

e ªe

ld o

f tem

pora

ry e

mpl

oym

ent i

n ac

cord

ance

with

Se

ctio

n 3a

of t

he T

empo

rary

Em

ploy

men

t Act

(Arb

eitn

ehm

erüb

erla

ssun

gsge

setz

). Th

e m

inim

um w

ages

set

dow

n in

the

Ord

inan

ce a

pply

to a

ll em

ploy

ers

and

tem

pora

ry w

orke

rs fa

lling

with

in th

e sc

ope

of th

e O

rdin

ance

.

The

Ord

inan

ce e

nter

ed

into

forc

e on

1 Ju

ne

2017

(dat

e of

exp

iry:

31 D

ecem

ber 2

019)

.

Third

Ord

inan

ce o

n W

orki

ng C

ondi

tions

in

Lon

g-te

rm C

are

(P�e

gear

beits

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National headline targets for 2020 List of actions* Description of the direct

relevance to the target

Employment rate among persons aged 20–64: 77%**

Employment rate among older persons aged 55–64: 60%**

Employment rate among women: 73%**

No changes compared to National Reform Programme 2017.

R&D expenditure: 3% of GDP (two-thirds from the private sector and one-third from the public sector)

On 16 June 2016, the heads of the federal and Länder governments approved the "Administrative agreement between the federal and Länder governments to promote the research-based transfer of ideas, knowledge and technology" ("Innovative Universities").

From 2018 onwards, the Federation and Länder will allocate €550 million over a period of ten years to the Innovative Universities funding programme, subject to the provision of funds by the relevant legislative bodies. The funding will be granted within the framework of two selection rounds. Funding will be granted using the following formula: 90% from the Federation, and 10% from the respective Länder where the selected higher educations institution are located.

On 16 June 2016, the heads of the federal and Länder governments approved the "Administrative agreement between the federal and Länder governments in accordance with Article 91b paragraph 1 of the Basic Law to promote top-level research at universities" ("Excellence Strategy"), as a follow-up programme to the Excellence Initiative. The agreement covers two funding lines: Clusters of Excellence and Universities of Excellence. From 2018 onwards, the Federation and Länder will allocate a total of €533 million per year for the entire programme, subject to the provision of funds by the relevant legislative bodies. Funding will be granted using the following formula: 75% from the Federation, and 25% from the respective Länder where the selected higher educations institution are located.

The funding programme aims to establish and expand alliances, networks and innovative forms of cooperation between (a) higher education institutions and (b) businesses and other key stakeholders in society. In addition, it aims to deepen the ties between higher education institutions and their surrounding regions and to expedite reciprocal transfers of knowledge and ideas among higher education institutions, society and business, thereby spurring technological and social innovation. The Excellence Strategy’s objective is to maintain and advance (a) scientiªc excellence, (b) the development of institutional proªles and (c) cooperative arrangements within academic and research systems. This long-term support will provide longer-term prospects for conducting top-level, internationally competitive research at universities.

Reduce greenhouse gas emissions by at least 40% by 2020 and by 80–95% by 2050, compared with 1990 levels

The new funding initiative "Heating networks 4.0: pilot project" was launched on 1 July 2017 and is set to run until 31 December 2020.

The objective is to provide incentives for larger model projects that can build a bridge between energy research and actual practice in order to facilitate the market entry of fourth-generation heating networks.

Table 11: Targets set by the EU’s strategy for growth and jobs



Increase share of renewable energy to 18% of gross ªnal energy consumption by 2020, to 60% by 2050 and to at least 80% in the electricity sector

National energy efªciency goals according to the federal government’s energy strategy of 28 September 2010: reduce primary energy consumption by 20% by 2020 and by 50% by 2050, compared with 2008 levels

This programme is the ªrst time that a systemic approach is being taken in the provision of funding for heating infrastructure. This means that support is being provided not only for individual technologies and components but also for fourth-generation, low-temperature heating networks, i.e. for entire systems. The initiative will provide funding for innovative and multivalent fourth-generation heating networks, on the condition that such networks meet standards for ensuring the highly efªcient, environment-friendly supply of heating and cooling. The programme covers the planning and construction of new systems as well as the transformation of existing systems.

The long-term intention is to foster the development of climate-friendly heating systems (with high shares of renewable energy and waste heat) that are as cost-effective as conventional systems run on fossil fuels. Projects that receive funding are expected to contribute towards the fulªlment of the federal government’s energy policy targets by increasing the share of renewables in the heating and cooling sector and by improving energy efªciency.

With the Climate Action Programme 2020 with its over 100 measures the federal government planned to ensure that the target of cutting greenhouse gas emissions in Germany by at least 40 percent below 1990 levels by 2020 is met. The government decided to monitor implementation of the measures listed in the programme in a continual process and publish an annual climate action report detailing the progress of implementation, the latest emission trends and anticipated reductions.

The Climate Action Programme 2020’s objective is to ensure that Germany meets its target of cutting greenhouse gas emissions by at least 40 percent below 1990 levels by 2020.

Climate Action Plan 2050: The Climate Action Plan conªrms existing goals and details some. It provides guidance to all areas of action in the process to achieve our domestic climate targets in line with the Paris Agreement. These areas of action are energy, buildings, transport, trade and industry, agriculture and forestry. The long-term goal is to reach extensive greenhouse gas neutrality by mid-century, thus both meeting the Paris Agreement’s goals and taking responsibility as an economically powerful industrial nation. For 2030 the Climate Action Plan further deªnes sectoral reduction goals and an overall GHG reduction of 55% compared with 1990 levels. In addition, it contains a number of strategic measures.

The Climate Action Plan 2050 deªnes emission reduction targets for 2030 and 2050 and provides guidance to all relevant actors. It further deªnes sectoral targets for the ªve main emitting sectors. To ensure achieving the 2030 targets, in 2019 the Climate Action Plan 2050 will be underpinned with an initial programme of measures having quantiªable effects on reductions. The objective of the programme is to ensure that the 2030 targets – the overall target as well as the sectoral targets - will be achieved.

Table 11: continuation




The funding programme "Energy-efªcient construction and refurbishment: grants for fuel cell systems" was launched in August 2016. The programme provides ªnancial support for the installation of stationary fuel cell heating systems in refurbished and newly constructed buildings. The objective is to expedite the market entry of fuel cell heating systems. In July 2017, the programme was expanded to cover non-residential buildings, and eligibility was extended to additional types of applicants (including small and medium-sized businesses, contractors, non-proªt organisations and municipal governments). The programme is ªnanced through the Federation’s Energy Efªciency Incentive Programme.

Fuel cell heating is an innovative and highly efªcient technology that combines both heat and power (cogeneration or CHP). Fuel cell systems convert fuels – usually natural gas or biogas – into electricity using electrochemical methods. The power generated through this process can be used for both heating and hot water. Compared with oil- or gas-based heating systems or with conventional CHP systems, fuel cell heating systems are more efªcient and generate less carbon dioxide.

The Landlord-to-Tenant Electricity Act, which entered into force on 25 July 2017, introduces new ªnancial support (in the form of an allowance) for landlord-to-tenant power supply systems. This will enable people living in rental housing to play a greater role in Germany’s clean energy transition. It will also provide new incentives for expanding the use of solar energy systems.

Landlord-to-tenant electricity is power that is generated by a photovoltaic system installed on the roof of a residential building and that is supplied directly – i.e. no grid transmission – to ªnal consumers (mainly tenants) in that building or in residential buildings/auxiliary facilities in the immediate proximity of that building. This new form of ªnancial support aims to help make landlord-to-tenant power supply systems more economically viable than has so far been the case. This will create incentives to install landlord-to-tenant power supply systems and thereby to increase the amount of solar-generated clean power.

The Act Amending the Combined Heat and Power Act entered into force at the beginning of 2017. Based on this act, the CHP Auction Ordinance entered into force in summer 2017. This ordinance sets the rules for auctions that will determine funding for a broad segment of CHP installations. The ªrst auction is scheduled for 1 December 2017. The auctions will help regulate the quantity of power produced, thereby ensuring the continued construction of efªcient, climate-friendly CHP systems.




Increase the share of persons aged 30–34 who have completed tertiary education or equivalent to 42%**

The full effects of revisions to the Federal Education and Training Assistance Act (in particular, the signiªcant increase in assistance rates and income allowances) that took effect at the start of the 2016 academic year and at the beginning of the 2016/2017 winter semester will not start to kick in until the current budget year and will continue in the 2018 budget year.

Reduce the number of long-term unemployed persons by 20% by 2020 compared with 2008 levels**

The reduction of long-term unemployment remains a key priority for the federal government that recently took office. To this end, the Coalition Agreement calls for the implementation of a holistic approach and the introduction of a new regulatory instrument to promote "labour market participation for all" (as part of Book II of the Social Code). These steps, among others, will ensure the resolute continuation of the government’s strategy to reduce long-term unemployment, which bears the title “Opening up opportunities, safeguarding social inclusion”.


* The 2017 NRP, which was sent to the European Commission in April 2017, includes a comprehensive overview of the state of play regarding the implementation of the Europe 2020 strategy in Germany, including a detailed table of actions (including description of action, anticipated impact, status and schedule), p. 61 et seqq. The overview in this table is limited to new actions (planned, adopted, in force), especially actions affecting public finances, which will take effect in 2018 and the following years. ** Target already met.


Estimation technique

Step of the budgetary process for which it was used

Relevant features of the model/ technique used Assumptions

Macroeconomic forecast

Before each tax estimation

Iterative-analytic approach: several partial models are used in the system of national accounts. Potential GDP estimation is done on the basis of the models developed and suggested by the Output Gap Working Group of the Economic Policy Committee (EPC) of the European Union.

Technical assumptions (for oil and commodity prices, foreign exchange rates and interest rates)

Tax estimation Basis for drafting and ªnalising budgeting

Estimation on the basis of macroeconomic forecast and time series analysis.

Macroeconomic forecast, estimations on the ªscal impact of discretionary tax measures

Fiscal impact of discretionary tax measures

Basis for tax estimation and drafting and ªnalising budgeting

Microsimulation models on the basis of tax statistics and macroeconomic forecast

Macroeconomic forecast

Table 12: Methodological aspects

Published byFederal Ministry of FinancePublic Relations DivisionWilhelmstr. 9710117 Berlin, Germany

Publication DateJune 2018

Edited byReferat I A 4

Where to order this publication:Tel: +49 3018 272 2721Fax: +49 3018 10 272 2721email: [email protected]

Further information can be found online at:www.bundesªnanzministerium.dewww.ministere-federal-des-ªnances.dewww.federal-ministry-of-ªnance.de

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