They already know that in the Ministry of Finance. When a new household is formed, it’s wish list season. The departments announce their financial needs and are traditionally immodest. But the requests for billions that are being brought to the Ministry of Finance this time apparently add a new facet to the wealth of experience of the officials there. From ministry circles it can be heard that nothing like this has ever been experienced.
It’s about the 2022 budget, but also about the medium-term financial planning up to and including 2026. The problem: In the years before Corona, the money was loose because tax revenue flowed in plentifully and the black zero was almost a sure-fire success. In the pandemic years 2020 and 2021, on the other hand, the money was easy because there was a pandemic. This year the financial policy turnaround is to be prepared, because from next year onwards the traffic light government only wants to incur as much debt as the debt brake allows. At the same time, the list of projects for the traffic light is gigantic.
The result: For 2022, according to sources in the Ministry of Finance, the departments’ spending requests would be around 70 billion euros above plan; by the end of 2026 it will be almost 400 billion. The financial planning, in turn, was not drawn up by just anyone, but by the ex-finance minister and current chancellor, Olaf Scholz (SPD). His successor Christian Lindner (FDP) wants to stick to it; especially because of the maximum new debt of 100 billion euros for 2022. Not because he thought Scholz was an icon. But because he can put his cabinet colleagues in their place. According to the motto: I didn’t put up the stop sign myself, but it looks pretty good.
So far, the talks have been “extremely slow”
At the end of December, Lindner wrote to his fellow ministers that new measures that would burden the budget would only be possible if there was a corresponding shift in your own budget. The coalition agreement provides the “clear guideline” that all expenditure should be reviewed and “a strict re-prioritization” should take place. Unfortunately, the coalition agreement only says that priorities should be set – but not Which. It can be heard that the talks at the specialist and state secretary level have so far been “incredibly slow”. It will be difficult to come to a common line. All houses wanted to implement the coalition agreement promptly, and there was little understanding of financial restrictions. This week, therefore, there are executive talks from minister to minister. The negotiations must be completed by Friday so that the cabinet can decide on the key points on March 9 as planned.
Lindner recently caused amusement in the Bundestag when he explained the status of the budget negotiations: “The federal cabinet is vibrating with design ambition.” There is “a great impatience to want to implement everything now”, but not everything can be realized directly. A “prioritization on the time axis” must therefore be made. That means: Lindner wants to postpone some projects. This used to be called “driving on sight”, which has recently gone out of fashion.
It can be heard that ultimately all departments have made enormous requests. Education Minister Bettina Stark-Watzinger (FDP), who not only wants to advance the digital pact with the federal states, but also wants to implement a student loan reform, is particularly far above plan. The budget of Labor Minister Hubertus Heil (SPD) is always the biggest chunk anyway; however, many items of expenditure are fixed, such as the subsidy for pension insurance. The defense budget is also traditionally important. Not only because of the long-term armaments investments worth billions, but also because it reflects the extent to which Germany is willing to assume international responsibility.
“I haven’t heard from any ministry which expenses they are willing to forgo,” criticizes Otto Fricke, spokesman for budgetary policy for the FDP parliamentary group. “But after 16 years of CDU chancellorship, there must be items from which the SPD, Greens and FDP say: We can do without these expenses!” The Greens, on the other hand, would prefer to lower Lindner’s debt ceiling if in doubt. “We know the importance of returning to the debt brake for the FDP,” says parliamentary group leader Lisa Paus. “But when it comes to future investments, the need would actually be greater rather than smaller.”
Lindner has promised that his house should be a “ministry of enablement”.
If the return to the debt brake in the coming year remains the case, net new debt will have to fall from EUR 100 billion this year to just around EUR 12 billion. Even if the coalition has just shifted 60 billion unneeded loans to the energy and climate fund, which now contains almost 100 billion euros, that does not solve all the problems. Because many of these funds are already planned.
There are also other imponderables, above all the dispute about cold progression that is looming for the autumn – whether the state should adjust the income tax rate to the significantly higher inflation or not. In the Bundestag, Lindner called the change in tax rates “the method of choice” and announced a “fair proposal”. On the other hand, there is little enthusiasm from the ranks of the Greens to compensate for these secret tax increases.
The traffic light could get some air if the tax revenues ended up developing better than expected. In January they were already significantly higher than in the same month of the previous year, but the ministry refers to special effects. It can be heard from householder circles that 2022 is expected to be based on additional income of 15 billion euros – but also with 25 billion euros more expenditure, in addition to the actual political department requests.
Lindner does not want to be the government’s bean counter while others with large sums aim for greatness. He’s just not the type for that. After taking office, he enthused that his house should be a “ministry of enabling”. At the same time, however, he also wants to be the one under whom Germany flips the switch in the direction of solidity – a self-made dilemma. For the time being, at any rate, he will have to practice the special discipline of all finance ministers: saying no.