CDU leader Friedrich Merz is still rejecting a reform of the debt brake in the Basic Law. A quick cross-camp compromise could pave his way to the Chancellery.
When everything is so difficult and complex, you should start with the positive: It will be good if the Karlsruhe debt verdict triggers another serious debate in the coming weeks about what we want, can and must afford in Germany. And it is also true that this discussion must not only be led by the traffic light coalition, but also by the Union. Because at the latest for the 2024 budget, which should actually have been put in place this week and is now possibly postponed until next spring, the SPD, FDP and Greens will probably also need the CDU and CSU – at least it would make sense if all five parties were here find a big compromise.
In fact, the country will only find its way out of the deep budget hole created by the fundamental ruling of the Federal Constitutional Court with a cross-campaign effort: savings are required, which are now being brought into play by the Union and the FDP in particular, and further debt for more investments in the regular federal budget.
Of course, in a budget of almost 450 billion euros, which Finance Minister Christian Lindner has so far planned for the coming year, there are always adjustment screws that can be tightened: you can and should with citizen’s allowance, parental allowance and also with the various very expensive supplements of the past few years in the pension system (pension at 63, mother’s pension) – but also in those tax privileges that the FDP and Union are happy to defend: the lower tax rate on diesel, for example, the company car privilege or the commuter allowance. Demanding savings, but only from other people’s clients, will no longer work.
Debt brake undermined with special assets
But even if everyone can agree on such a savings package, it will hardly be enough to cover the need for consolidation resulting from the Karlsruhe ruling: according to initial estimates, this will probably reach 40, possibly even 50 billion euros in the coming year alone lay. And in the years that followed, things continued like this.
At this point we should remember the infamous cabinet meeting in Meseberg in 2010. The black-yellow coalition under Angela Merkel decided to make savings of more than 80 billion euros. A large part of this was taken out of the Bundeswehr – which is why we now complain about an army that is only partially prepared to defend itself and that we can only rearm again through a special fund worth 100 billion in addition to the regular federal budget (because the debt brake in the Basic Law does not allow it otherwise ).
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In general, the history of the debt brake is a story of trickery: in the first ten years of its existence, the country would have needed a spending brake, because to achieve its famous black zero, the then Finance Minister Wolfgang Schäuble did not have to save money, but simply increased spending every year not to produce even higher surpluses. With the first crisis (Corona), however, the brakes were lifted, the first shadow budgets were invented under a CDU chancellor, and all 246 members of the CDU/ CSU too.
Disposal movements in the Union
Instead of limiting borrowing, the debt brake in the Basic Law merely increased political creativity. Which was and is right in view of the acute tasks that politicians faced during the pandemic and which they still face now with the Bundeswehr or the necessary modernization of infrastructure and the economy. Anything else would be political and economic suicide.
The fact that the differences between the government and the opposition are nowhere near as clear as CDU leader Friedrich Merz and his general secretary Carsten Linnemann would like to believe today can be seen from the fact that no one of any importance in the Union is supporting them: at least they have Little has been heard from North Rhine-Westphalia’s Prime Minister Hendrik Wüst on the debt brake, nor from the actually rock-solid Markus Söder from Bavaria or the party’s youngest shooting star from Hesse, Boris Rhein.
Instead: the CDU-governed Schleswig-Holstein decided this week to suspend the debt brake for this year and next; In addition, Berlin’s Governing Mayor Kai Wegner and Sachsen Anhalt’s Prime Minister Reiner Haseloff, two CDU state princes, are already calling for the debt brake to be reformed straight away in the Basic Law instead of having to keep coming up with new justifications for an emergency from year to year.
Federal government and investments
The entire convoluted nature of today’s regulation in the Basic Law can be seen in another example, of all things a (sensible) pet project of the Liberals: Finance Minister Christian Lindner wants to take on up to 12 billion euros in new debt every year in the coming years in order to then use it to buy shares buy and invest them in the stock market for your statutory pension. For the debt brake, such actions are not new debts, but rather an “asset exchange”.
Now the expansion of equity investments in retirement provision is years overdue and the whole project is therefore not fundamentally wrong. But: Whether it actually serves Germany’s prosperity better if the state invests the 12 billion euros it borrows every year in listed companies around the world instead of modernizing the public infrastructure and the economy here is at least still open to debate have a discussion. According to this model, the logic of the debt brake would be served if the state were to become (co-)owner of all projects that it wants to support in the future. Nationalization instead of subsidies – let’s see when the Greens and the Left take up this idea in order to save their planned funding programs.
No, the solution must be: If the stock pension is possible, then it must also be possible to modernize the local rail network, the power lines, the roads and the development of new industries – without the federal government becoming an owner everywhere. To achieve this, the debt brake in the Basic Law must be reformed, as most leaders in the CDU and CSU now know. If the FDP does not want to take part, there is still a historical window for this: the SPD, Union and Greens currently have a two-thirds majority in the Bundestag. However, it is uncertain whether this majority will also exist after the next federal election.
For Friedrich Merz, the Karlsruhe ruling could turn out to be an extremely powerful lever: he could use his Union’s position to drive the traffic light coalition apart and clear the way for new elections. In his own interest, he should have previously found a solution to the debt brake that would then make it easier for him to govern.