Government statement on the budget crisis: How to get out of the rubble?

The plan to finance coalition projects through shadow budgets did not work. The budget for 2024 is shaky, the coalition is more divided than ever. And the Chancellor? So far it has remained unclear. Today he has to explain himself.

There are those moments when Chancellor Olaf Scholz just grins when he is particularly under fire in the Bundestag. The last time this happened was when he had to answer questions from parliamentarians, especially from the Union, after the Federal Constitutional Court’s ruling on the supplementary budget. The Chancellor should admit that, as a former finance minister, he was responsible for this budget trick. But instead of remorse there was only the following sentence: “I am also very proud that we respect the judgments even if we previously had different opinions.” Then came a mischievous smile.

That should mean: He, the lawyer, the former finance minister, now the chancellor, had a different opinion for a long time that moving corona aid to the climate and transformation fund was legally acceptable. But that wasn’t the case – according to the ruling of the Federal Constitutional Court.

No sign of regret

There is currently no sign that the Chancellor is now showing remorse or admitting a mistake. Instead, Scholz is faced with budgetary rubble, as all coalition projects appear to be collapsing at first glance. Now he has to make it clear in the government declaration how the traffic light coalition wants to operate in the next two years.

Lindner and the debt brake promise

The positions within the traffic light coalition could not be further apart at the moment. On the one hand, there is an angry Finance Minister Christian Lindner, who had to jump over his shadow, suspend the debt brake again for 2023 and declare the emergency. Yesterday the cabinet agreed on a supplementary budget for 2023. After the ruling from Karlsruhe, the government has no other choice to legally secure the money that flowed from the economic and stabilization fund for the gas and electricity price brake.

But in doing so, Lindner had to break a promise to his FDP regular voters that he would no longer suspend the debt brake. He has long been annoyed by the fact that he is repeatedly referred to as the finance minister of the many shadow budgets or as the debt minister. The truth, however, is also that Lindner supported the Chancellor’s budget trick from the start – knowing that the many planned projects of the self-proclaimed progress coalition would not have been financed otherwise.

At the same time, one relief package after another was put together to cushion the consequences of the energy crisis and avoid the feared “rage winter” – that was expensive and unforeseeable at the start of the traffic light government. Saving is therefore the order of the day, the liberals repeat again and again like a mantra. “Grinding the debt brake”, i.e. further suspending it, is not an option for the FDP.

Abrupt end of gas and Electricity price brakes

On the other side is the Chancellor’s party, the SPD, which still does not want to cut social spending and does not want to break its political promises. The Social Democrats are angry that the finance minister declared payments for the gas and electricity price caps to end in 2024 in a radio interview, even though an extension of the relief had been agreed before the verdict in the Bundestag. A communication error? Intention?

The SPD is also discussing suspending the debt brake for 2024; the situation is still critical due to the consequences of the war against Ukraine and other crises such as in the Gaza Strip. A special pot is needed for special situations, which will also be the case in 2024, SPD parliamentary group leader Rolf Mützenich recently explained Report from Berlin. Many liberals are shaking their heads vehemently after the Karlsruhe ruling, as the declaration of emergencies was defined very narrowly.

Climate protection projects are up for grabs

The Greens are also worried about the coming weeks and a solution on how to manage the 2024 budget. Climate protection projects that should be funded by the Climate and Transformation Fund (KTF) are up for consideration.

60 billion euros in the next four years, i.e. 15 billion per year, are simply gone from the KTF after the Karlsruhe ruling. They are missing for investments in industry and climate protection, and that is why Economics Minister Robert Habeck never misses a moment in explaining why they are so important. The Greens repeatedly target climate-damaging investments – cuts to which the FDP should now move.

Where is the Chancellor?

And the Chancellor? It has remained vague for days. Occasionally promises industrial modernization at public meetings, talks about relief where it is necessary, tries to bring calm to the debate. He never promises anything and doesn’t allow any questions; he has been following this communication style for days. But in the government declaration he will now have to at least show a way of what the traffic light government can and wants to do.

Political scientists also fear that if he doesn’t become more specific soon, unrest among the population could grow. However, the Chancellor’s government declaration alone will not be the solution to the budgetary shambles. There are still long debates ahead for the traffic light parties, including in coalition committees, in which they have to agree on spending and priorities for 2024.