Nearly a month after a court ruling left a hole in Germany’s 2024 budget, the government in Berlin introduced a new spending plan that included cuts in programs to address climate change, but confirmed its commitment to 8 billion euros ($8.6 billion) in direct military aid to Ukraine.

The new budget will comply with the constitutional rules against taking on new debt, the government said.

Budget Cuts and Subsidy Reductions

Cuts were made from a fund to help businesses move toward more environmentally-friendly practices, and subsidies were reduced for electric vehicles and solar energy. Subsidies promised for a new semiconductor factory will be kept.

Announced before lawmakers go on holiday break on Friday, the spending plan came after prolonged and arduous negotiations that had threatened to rupture the government’s three-party coalition. Lawmakers must still vote on the plan, but it’s expected to pass because the coalition has a majority in parliament.

The Budget Crisis and Political Fallout

Germany’s budget crisis started four weeks ago when the nation’s top court ruled that the government had violated the constitution by transferring a special €60 billion fund created to deal with the Covid pandemic emergency into a “climate and transformation fund.”

That put the spotlight on the differences among the coalition partners: the Greens seeking money to spend on climate transformation; the Social Democrats wanting to secure extra funding for social security payments; and the liberal FDP party, which wanted to avoid tax increases and preserve subsidies for commuters using cars.

The crisis has taken a political toll on a government that had been facing criticism for other reasons. According to a recent national poll, only 19 percent of respondents thought Mr. Scholz was suited to the job of chancellor. And the leader of the conservative party, which has been critical of the government’s handling of the budget issues, demanded that Mr. Scholz face a confidence vote when parliament returns in 2024.

Industry Response and Conclusion

While there was some criticism of the budget agreement from business groups, many agreed that it was important to finally have a budget.

“It is both good and important that the federal government has reached an agreement,” Bertram Kawlath, the vice president of the VDMA, an industry association of mechanical engineers, said in a statement. “The weeks of uncertainty are now over, clearing the way for important investments,” he said.