There are signs of tough austerity measures in resolving the budget crisis. Contrary to the wishes of the SPD, the federal cabinet will not deal with the federal budget for the coming year this Wednesday due to the difficult negotiations. This is clear from the agenda and was also presented as such by cabinet members. For days, Chancellor Olaf Scholz (SPD), Economics Minister Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) have been discussing solutions in different rounds and scouring the budget for deleted items.
This means that the budget law can no longer go through the full parliamentary process this year. A cabinet decision and referral to the budget committee, it was said, is conceivable, i.e. a political agreement. The coming year would then have to begin with a provisional budget management under the supervision of Federal Finance Minister Lindner. His cabinet colleagues would then have to have him approve any expenditure that is not unavoidable for legal, contractual or other reasons. Although the procedure is common after federal elections, it is unusual for an incumbent federal government to find itself in such a situation.
There are huge gaps in the budget
The SPD leadership had therefore expressed the expectation that the coalition would agree on the key points of the new 2024 budget by the middle of this week, after the Federal Constitutional Court objected to the federal government’s 2021 supplementary budget in mid-November. This ruling from Karlsruhe also affects the federal budget for 2023 and 2024. It had declared the reallocation of 60 billion euros of unused Corona loan authorizations to the Climate and Transformation Fund (KTF) to be unconstitutional.
In 2024 alone, the fund should finance projects to transform the economy and industry towards climate neutrality with a volume of almost 60 billion euros, while at the same time complying with the debt limit in the core budget. But now there are huge gaps there; for 2024 alone, Lindner had estimated the savings requirement at 17 billion euros. Large projects from the KTF are on the brink, such as supporting companies in switching to hydrogen and transforming steel and chemical plants; The establishment of chip factories in East Germany should also be encouraged.
Social Democrats and the Greens recently pushed for the revised budget for 2024 to be passed through the Bundestag and Bundesrat by the end of the year. One argument for this was that Germans should not go into the Christmas holidays with a feeling of uncertainty and that companies also need clarity about the funding and investment framework that still exists. The FDP, on the other hand, pleaded for thoroughness in order to present a budget that is legally binding this time. The ranks of the Greens are now also saying that after the Constitutional Court’s decision on the consultation periods for the heating law in the summer, one should not make oneself vulnerable – for such a procedure, a complaint from a single member of parliament is sufficient.
Pressure comes from the federal states. “We now expect quick financing commitments from the federal government, especially with regard to the hydrogen projects,” said the Prime Minister of Lower Saxony, Stephan Weil (SPD). South German newspaper. “In total, the investment volume is likely to amount to around ten billion euros.”
Scholz is receiving pressure from his own party
In order to have more scope for future investments, the SPD proposed declaring a kind of limited emergency in order to suspend the debt brake again. It should only refer to the war in Ukraine and its consequences, i.e. military support, as well as the costs for refugees, humanitarian aid or the reconstruction of the country. SPD financial experts said it would cost an estimated 20 to 30 billion euros, which could be financed through extra loans. However, coalition politicians from the other factions questioned whether such a model was sustainable. The FDP actually does not want to suspend the debt brake again, but at the same time it strictly rejects tax increases.
The SPD federal party conference, which begins on Friday in Berlin, creates additional pressure. Without an agreement by then, there are fears that proposals could further restrict Chancellor Scholz’s scope – the party strictly rejects cuts in the social sector, and citizens’ benefits are also set to increase by twelve percent from January, as planned. Parts of the Jusos want to abolish the debt brake completely.
Last week, Chancellor Olaf Scholz (SPD) was a guest at the Seeheimer Kreis, the conservative current in the SPD parliamentary group. It was also about the alternative idea of a special fund for transformation and climate protection, which, like the special fund for the Bundeswehr, could be anchored in the Basic Law. It would have the advantage that companies in particular would have long-term investment security; But this requires a two-thirds majority in the Bundestag and thus the help of the Union.
The Union does not categorically rule out this, but demands that all projects within it must be precisely defined in order to rule out the money being used for other purposes, for example to finance expenditure from the core budget, as the coalition did with the special fund for the Bundeswehr . But since such negotiations take time, this would only be something for the coming year, not a short-term solution. The same applies to considerations by the SPD and the Greens about reforming the debt brake so that more debt can be incurred for more investments than the previously permitted 0.35 percent of gross domestic product (GDP).