Germany’s ruling coalition has approved a 2024 finance plan that slashes net new borrowing to the lowest levels since before the pandemic and squeezes spending across all government departments except for defense.

The budget is part of Finance Minister Christian Lindner’s push for further fiscal consolidation after a constitutional limit on taking on new debt was suspended for three years to help deal with the fallout from the pandemic and the energy crisis triggered by Russia’s invasion of Ukraine.

Lindner — a fiscal hawk who leads the business-friendly Free Democrats — argues that budgetary prudence will help dampen inflation and assist European Central Bank policymakers in their efforts to bring the annual increase in consumer prices in the euro region back to their target of 2% over the medium term.

The budget and finance plan, entitled “Back to fiscal normality,” includes net new federal borrowing of €16.6 billion ($18.1 billion) next year, down from €45.6 billion in 2023, according to government figures distributed Monday. It will then drop to €16 billion in 2025, and fall to €15 billion by 2027.

“We are ending the crisis mode of expansionary public finances,” Lindner said at a news conference in Berlin. “This underscores that we want to remain the gold standard of government financing.”

Defense Minister Boris Pistorius will be allocated €51.8 billion in 2024 — €1.7 billion more than this year.

An additional €19.2 billion from a special fund set up immediately after Russia invaded Ukraine will lift total military investment to €71 billion, helping Germany meet a NATO target of spending at least 2% of output annually on the defense.

Overall spending will decline to €446 billion next year from €476 billion in 2023, before rising again incrementally through 2027.

Tanja Goenner, managing director of Germany’s BDI industry lobby, welcomed Lindner’s more frugal budget, calling it “an important step toward consolidating fiscal policy.”

“At the same time, consistent prioritization of spending is necessary,” Goenner said in an emailed statement. “Strengthening the business location and appropriate investment incentives, especially relating to the digital transformation, climate protection and a sustainable, reliable energy supply, must be key points here.”

The finance plan will now be sent to parliament for fine-tuning by lawmakers, a process that typically lasts until final approval in the upper house of parliament, where Germany’s 16 federal states are represented, in mid-December.

(Updates with the German Finance Minister’s quote in fifth paragraph)