German government coalition diverges on how to fill budget gap

9 months ago 27

With the German government scrambling to fill the budget gap left by a recent top court ruling, proposed solutions have diverged the three-party coalition, exposing old budgetary ideologies.

A recent ruling by the German Constitutional Court left a €60 billion hole in the country’s finances, forbidding the use of debt justified by the COVID-19 crisis for the “Climate and Transformation Fund.”

“We will have to deal with three major cost blocks,” German Finance Minister Christian Lindner (FDP/Renew Europe) told Funke Mediengruppe on Saturday. This would include the social spending, international aid, and subsidy programmes, Lindner said.

In 2024, €17 billion is still missing, Lindner explained, and the lost €60 billion would have been spread across the next couple of years.

Germany led in development aid and climate funding abroad, “but perhaps the gap to second place can be reduced,” Lindner said.

His ideas did not sit right with the leading government party SPD (S&D), especially in light of the current COP28 climate conference.

“We are the third-strongest economy in the world, and we are the fourth-largest donor. That’s only first place if you look from behind,” Development Minister Svenja Schulze (SPD) told Focus Online regarding Linder’s assessment of the situation.

Meanwhile, the SPD has other plans, questioning the coalition’s agreement not to raise taxes and the return to the ‘debt brake’ in 2024, suspended in light of the COVID pandemic and the energy crisis from 2020 to 2023.

As the transfer of unused COVID-debt to the climate fund was not possible, “for us as the SPD, this naturally also means that we need to talk about the other two things now,” SPD leader Lars Klingbeil told dpa.

Lindner’s liberals, however, are not happy with Klingbeil opening such discussions, as the promise not to raise taxes was a condition for FDP to join the coalition government.

“Tax increases are not only rightly ruled out in the coalition agreement, they would also be completely the wrong thing for our competitiveness,” FDP vice-chair Johannes Vogel said.

He also ruled out suspending the debt brake for next year. “The state does not have a revenue problem, but it must now prioritise more clearly, realise the need for reform and use the resources at its disposal with precision,” Vogel told ntv.de.

These two key discussion points will also be topics at the SPD’s party conference next weekend. There, the SPD intends to adopt a resolution to relax the debt brake and to increase taxes for the “super-rich.” However, Klingbeil said that “this is not a direct reaction to the Federal Constitutional Court; it is our social democratic stance, but it is exactly the right one at this moment.”

(Kjeld Neubert | Euractiv.de)