In a move to counter expected rising unemployment, the German federal government plans to provide a loan of 2.35 billion euros to the Federal Employment Agency (Bundesagentur für Arbeit) this year, according to a report by the Nuremberg authority to the Budget Committee of the German Bundestag, as published by the news magazine POLITICO on Friday.
Initially, the government had anticipated a deficit of 1.33 billion euros for the current year, but the updated forecast now projects a shortfall of nearly 5.3 billion euros. To bridge the gap, the remaining reserve of around 3.2 billion euros would need to be exhausted and a loan of 2.35 billion euros would be necessary, the report states.
Finance Minister Lars Klingbeil (SPD) would need to incorporate this in his new budget draft, which is set to be approved by the cabinet in late June. Bundesagentur-Chefin Andrea Nahles had recently ruled out an increase in the contribution rate for unemployment insurance.
The agency expects that, alone, the expenses for unemployment benefit I (Arbeitslosengeld I) will increase by around four billion euros in 2025, more than previously anticipated.
While the loan from the federal government would likely not resolve the Federal Employment Agency’s financial problems permanently, the report suggests that the agency will likely remain in the red until 2029. “By the year 2029, the required liquidity aid from the federal government would total around 11.9 billion euros” the document states. The projections for future years, however, are subject to a high degree of uncertainty.