It is not every day that international economists interfere in German coalition talks. It is therefore quite remarkable what the American Nobel Prize winner Joseph Stiglitz and the British economic historian Adam Tooze are now doing in the Time Have written. The two explicitly warn against making the FDP chairman Christian Lindner the federal finance minister, because he represents “conservative clichés” when it comes to budget and finances. Lindner wants to hold the money together instead of investing it, which is necessary today. And they add the sentence: “The Ministry of Finance is so important because, unlike all other ministries, it combines technical and political power as well as national and international tasks.”
One could argue for a long time about the “conservative clichés”, but there is no doubt that the nation’s treasurer actually has “technical and political power”. Those who have their hands on the state treasury have power like only the Federal Chancellor himself. The power is shown, for example, in the fact that the finance department appears in the Basic Law (Articles 112 and 114) and is protected by it. If the government wants to spend money, the finance minister can use his veto. The BMF has an influence on the expenditure of other departments through so-called mirror presentations. Whether Robert Habeck or Christian Lindner will take over the ministry is therefore more than just a question of the allocation of posts.
The history of the BMF is closely linked to parliamentary democracy in Germany. It was 1919 when the Swabian center politician Matthias Erzberger made the Reich Ministry of Finance out of the imperial treasury in Berlin. He built up a modern tax administration and introduced a tariff for income tax, which in principle still exists today. Erzberger was murdered by right-wing terrorists in 1921.
The Federal Republic followed on from Erzberger’s legacy. Fritz Schäffer (CSU) became the first federal finance minister in 1949. He was the only one to have managed to create state assets – a total of eight billion marks. At that time, however, Federal Minister of Economics Ludwig Erhard had much greater influence. That was due to the person of Erhard, but it was also due to a bureaucratic delicacy that was neglected: In the Ministry of Economic Affairs there was a “Money and Credit” department that dealt with the D-Mark and currency issues. The importance of this department became apparent when the Federal Republic became more and more closely interwoven with the world economy. According to Erhard, Karl Schiller in particular used this instrument masterfully, SPD economics minister in the first grand coalition from 1966 to 1969. With his struggle for the revaluation of the mark, he became a star.
The federal election of November 10, 1972 was a turning point
An economics minister should never again have as much power as Schiller. The turning point was the federal election of November 10, 1972. Chancellor Willy Brandt had won a convincing victory, the SPD became the strongest parliamentary group with what seems fantastic today, 45.8 percent, but the FDP had also grown strongly. To take this into account, the coalition partners decided to assign the Ministry of Economics to the FDP. The former federal manager of the party, Hans Friderichs, became the minister. Its power, however, was curtailed on one crucial point. Finance Minister Helmut Schmidt made sure that the money and credit department was relocated to his house. The BMF was now responsible for the currency, as well as for the International Monetary Fund, the World Bank and the G7 world economic summit. The BMF now got the domestic and foreign political power that Professors Stiglitz and Tooze fear today. Finally, under Theo Waigel (CSU), the BMF negotiated the Maastricht treaties for Germany on the introduction of the euro.
Meanwhile, the FDP was booked to the Ministry of Economics. Since Hans Friderichs, all incumbents have come from the FDP, provided that it co-governed at all. On the other hand, the Liberals avoided the Ministry of Finance, which is astonishing, because tax issues are actually central to the party’s program. Since 1966, when the last FDP finance minister, Rolf Dahlgrün, resigned, the BMF has been led by the SPD and the Union. And when the FDP joined a black-yellow coalition under Angela Merkel in 2009, chairman Guido Westerwelle decided on the Foreign Ministry and left the BMF to Wolfgang Schäuble from the CDU, which from the perspective of the Liberals may have been a capital mistake.
Lindner apparently wants to learn from this mistake. Comment by Theo Waigel, with a term of office of 3476 days, the head of the BMF who has served the longest so far: Lindner must definitely demand the office for the expectations that he has aroused. The task will be tricky, however. Olaf Scholz, the current incumbent, was able to spend the money with full hands to fight the crisis. His successor must save again and reduce the debt: “He should be aware that he must prepare the people for sacrifices and uncomfortable truths.”