Finances: desire vs. reality: schedule for federal budget burst

Finance Minister Lindner pulls the emergency brake: Negotiations on the spending requests of his cabinet colleagues in the coming year are deadlocked. Is the fundamental dispute now threatening to paralyze work?

They negotiated for weeks and sometimes argued publicly, now the budget conflict in the federal government has escalated: Finance Minister Christian Lindner cannot keep to the planned timetable for the 2024 budget. The FDP politician has indefinitely postponed the cabinet meeting originally planned for next week. He deliberately does not name a new deadline. “We will have to talk about financial realities together again in the cabinet,” said Lindner of the German Press Agency.

Disputes about the budget are not uncommon in the federal government: almost every year the ministers want more money than the finance minister wants them to have. But now the ideas of Lindner and several of his cabinet colleagues are so far apart that the finance minister wants to talk again in principle.

Total blockade feared

That was rare – and in extreme cases it could paralyze the work of the red-green-yellow federal government. Because the dispute over the individual budgets lasts longer and there is no financial basis for legislative projects. The oppositional Union is therefore demanding a word of power from the highest level. “Chancellor Scholz must now intervene immediately to resolve the budget blockade,” said the head of the CSU member of the Bundestag, Alexander Dobrindt, of the dpa.

Scholz himself was relaxed: In the past few years, the presentation of the benchmarks “has been postponed again and again, even when I was finance minister,” he said in Munich. “It never really caused a lot of excitement, not now either, at least not for me.” Economics Minister Robert Habeck also tried to calm things down. “It’s not a big drama,” said the Green politician. “We simply have an objective problem in the household.” We try to solve that together.

Spending wishes billions over financial plan

His ministerial colleagues have reported to Lindner that they would like to spend around 70 billion euros more than the previously agreed financial plan. The new Defense Minister Boris Pistorius (SPD) alone wanted ten billion euros more for the troops. Lindner is not averse to increasing the defense budget somewhat, but has called for savings elsewhere.

New funding programs after Habeck’s ban on new oil and gas heating systems from 2024 and numerous other projects are also being debated. In various rounds of negotiations, it was possible to reduce the difference between Lindner’s ideas and the wishes of his colleagues – but the gap opened up again elsewhere.

Higher costs due to interest and the Ukraine war

Because the costs for the federal government will increase significantly in the coming year according to the expectations of the Ministry of Finance. This is partly due to the burden of interest payments, which have increased tenfold within two years from 4 to around 40 billion euros. The ministry also mentions the ongoing wage negotiations in the Bundeswehr and elsewhere in the public sector, the outcome of which could cost billions. Military and financial aid to Ukraine also have an impact.

“The high interest burden is a clear signal to curb the state’s debt,” emphasized Lindner. At the same time, he gave a clear rejection of tax increases for more income: the citizens are already paying high taxes.

Lindner rejects tricks

In recent years, a compromise has always been found in budget negotiations because either sufficient funds had to be distributed or debts had to be taken on. In the meantime, however, the reserves have been used up and Lindner insists on compliance with the debt brake. The regulation in the Basic Law stipulates a strict credit limit for the federal government, which may only be suspended in emergencies – that was the case, for example, in the corona pandemic.

The FDP leader also categorically rejects budgetary tricks such as reallocating unspent funds for the gas and electricity price brake to other projects. “So we have to learn to get by with the available financial framework,” he warns. That means setting priorities “because not everything can be financed at the same time”.

Correspondence between Habeck and Lindner

It is precisely this prioritization that is highly controversial in the federal government, as an exchange of letters between Lindner and Habeck recently showed. The Economics Minister complained that Lindner was setting priorities unilaterally and named plans such as sales tax reductions for the catering trade and the financing of the Bundeswehr. The Greens, on the other hand, insist that the course is already being set for the basic child security planned from 2025, which is to bundle services from child benefit to child allowance and financial support for school trips.

It is not entirely clear what will happen next with the budget. It will continue to be spoken, it said from the Ministry of Finance. A budget retreat would also be conceivable, in which the ministers would have to justify in a large cabinet round where they would spend more – and which of their colleagues they would cancel for it.

Key points only the first step – overall schedule until December

Whether the current postponement will delay the adoption of the budget as a whole is also still open. The submission of the vertices is only a first step. According to the previous plan, the final government draft is not to be approved by the cabinet until June 21. After that it would be up to the Bundestag. Here, a decision is not sought until December 1st. So there is still time to square the circle between additional requests worth billions and a finance minister who keeps the money together.


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