analysis
The new tax estimate will be presented on Thursday. Due to the weakening economy, public budgets will probably have to make do with less tax revenue than forecast. And the situation threatens to get worse.
Even presenting the draft budget for 2024 was a feat of strength. Finance Minister Christian Lindner (FDP) spoke of “intensive consultations within the federal government”. On the one hand, this was due to the spending wishes of the various ministries, and on the other hand, because the time of Corona-related exceptions to the debt brake is over.
However, the dispute over cuts in parental allowance and the structure of basic child security is likely to be just a foretaste of the distribution struggles of the coming years. Lindner has already announced that there is still a “qualitative consolidation” of the budget: “Too high interest expenses, increasing social spending” – with this combination Germany is not fit for the future.
Budget 2024: Not all planned expenditure has been financed yet
The federal budget for the coming year has not yet been finalized. The tax estimate that some coalition politicians had hoped for is likely to end up predicting less, rather than more, revenue. And – CDU budget politician Christian Haase points out: There is still no funding for some of the measures planned by the traffic light coalition.
In contrast to the budget for the current year, there is no approach for the stock pension. In addition, the higher citizen allowance must be financed. Ultimately, it is expected that the federal government will increase the costs of migration in the upcoming talks with the states.
Special assets now allow higher debts
In addition to the budget with its expenditure of (so far) almost 450 billion euros, there are many more billions to come, which flow through the so-called special funds.
In fact, more than 100 billion euros in debt would be incurred in 2024 and not just the around 17 billion that are in Lindner’s draft, criticizes the budget policy spokesman for the AfD parliamentary group, Peter Boehringer. In contrast, Green Party deputy Andreas Audretsch points to the current crises – from the energy crisis to the climate crisis, which could not be overcome without the special funds.
The debts have to be paid off soon
However, the special funds that currently enable additional investments will reduce the scope for political maneuvering in just a few years. From 2028 onwards, the corresponding debts will have to be repaid gradually.
Professor Jörg Rocholl, chairman of the Scientific Advisory Board at the Federal Ministry of Finance, speaks of an impending ice wall that the federal government is heading towards. Also because the special funds for the Bundeswehr are likely to be used up around the same time. The promise by Chancellor Olaf Scholz (SPD) to invest two percent of economic output annually in defense must then be fully financed from the budget.
Budget risk Social Security
FDP budget politician Otto Fricke admits that no one currently has an idea of how these challenges can be solved.
Fricke also points to another factor that is likely to influence budget planning in the coming years, the upcoming retirement of the so-called baby boomers: “This affects pension insurance, but also health and nursing care insurance and ultimately means for the federal government that it… There is no doubt that additional subsidies would have to be provided from the budget.”
Higher interest rates tighten Budgetary margin a
Finally, the risks for future budgets include interest rate developments. The combination of higher debt and rising interest rates means that one in ten euros from the budget will soon flow into debt financing. Thanks to a good credit rating, the federal government still pays relatively low interest rates compared to other countries.
But Helge Braun, the chairman of the Bundestag’s budget committee, warns: If the debt continues to rise, Germany could lose its good rating: “And that would mean that interest expenses would rise significantly again,” said the CDU politician and former politician Chancellor of Angela Merkel.
Against this background, Braun – similar to Finance Minister Lindner – advocates clear setting of priorities in the budget: “Priority is needed for investments and for internal and external security”. Expenditures that are “more consumptive and trigger additional bureaucracy” would have to be postponed.
How can tasks be financed “justly and fairly”?
Green parliamentary group vice-president Audretsch, on the other hand, focuses on investments in education, infrastructure, security and new climate technologies and warns against only looking at the budget in the short term and making savings in the wrong places: “That would ultimately cost a lot more.”
From Audretsch’s point of view, society is faced with the debate “how these tasks can be financed fairly and equitably.” Because it is pretty certain: the challenges for the national budget will be even greater in the coming years than they already are.