A hint of a showdown: Scholz and the search for the da-geht's-lang moment

Budget crisis - A hint of a showdown: Scholz and the search for the da-geht's-lang moment

At least the coalition partners are already in agreement on this point: no one intends to let anyone look at their cards. And what the three leaders are talking about is simply not being revealed. There is a whiff of coalition negotiations in the Berlin air, only this time it doesn't smell of citrus freshness, but rather of speculoos - welcome to the coalition Advent.

So this is the starting position ahead of the possibly decisive round of budget negotiations. The coalition should have reached an agreement by tomorrow at the latest so that the cabinet can approve the draft budget, just in time for it to be signed and sealed before the end of the year.

Forecast? Difficult.

SPD General Secretary Kühnert does not want to give up the welfare state

Tuesday morning in the Willy Brandt House. SPD General Secretary Kevin Kühnert has invited guests to a press conference at the party headquarters in the "Kasino" meeting room. It is supposed to be about the party conference at the weekend and the future priorities of the Social Democrats. But these days, everything is simply linked to the budget crisis. One question that the top party strategist is therefore being asked in different variations: How are the negotiations going?

"You have a General Secretary sitting in front of you who has to prepare both scenarios, that's part of the job," says Kühnert. An agreement is reached before the party conference, which begins on Friday in Berlin. Or no agreement can be reached. Kühnert says he does not yet know which scenario will occur. However, he also joins the chorus of comrades who have been chanting tirelessly for days: the welfare state will not be abandoned "in whole or in part". That is the party's position. But what about the government?

The citizens' income in particular is at the center of the savings debate. The CDU/CSU and FDP want to stop the planned increase at the turn of the year. However, this would not offer great savings potential, if only for legal reasons(read more here). To be on the safe side, Federal Minister of Labor Hubertus Heil, SPD, has already put a lid on the debate - hardly without the Chancellor's blessing.

Is Hubertus Heil opening a back door for savings?

ButHeil also says: "I am also in favor of discussing how we can make the welfare state more targeted." A back door for savings elsewhere? Possible.

If the party and parliamentary group have their way, an emergency situation should also be declared for 2024. Suspending the debt brake is "not a fetish" of the SPD, said General Secretary Kühnert. However, he lacked "creativity" as to how else the many Ampel projects could be financed. In other words: cuts alone will certainly not be enough.

The pressure is great. If no fundamental agreement is reached before the SPD party conference at the weekend, Olaf Scholz will probably be in need of an explanation. If the Chancellor also holds out the prospect of cuts to social benefits, things could become even more uncomfortable for him and his coalition. The displeasure of his comrades could then be reflected in sensitive motions that could put the party leader and the Chancellor in fiscal restraints. Scholz will address the delegates on Saturday. Either way, he has had more pleasant days ahead of him.

Two guard rails and no emergency

From the FDP's point of view, the situation is quite simple. There are two conditions that have always been non-negotiable for the Liberals. Two guard rails, as Finance Minister Christian Lindner likes to say. Firstly, no tax increases. Secondly, the debt brake applies.

You can read a certain hierarchy from the order of the two guard rails. Standing firm against tax increases is more important than showing backbone on the debt brake. But only very, very slightly more important. According to the FDP, anyone who raises taxes in Germany, a high-tax country, is not only damaging the economy, no, they are also turning voters against themselves. Especially those who have relied on liberals to deliver what they promise.

In comparison, the debt brake was a rather abstract instrument that was always considered right and important, but which was mainly discussed by finance nerds outside of politics. The Constitutional Court ruling has changed this perception. And anyone who is celebrated for sound public finances cannot ignore this. The FDP is now reacting accordingly harshly when the SPD and Greens propose declaring another emergency for 2024 due to the war in Ukraine. It wants to avoid this at all costs; it cannot be the lesson from Karlsruhe.

The FDP is hoping for pension reform

But what does the FDP want? Pretty simple: cut, cut, cut. According to party and parliamentary group leaders, the budget gap of 17 billion euros is not so big that it cannot be plugged by austerity measures. Some liberals want to sell the crisis as an opportunity and finally push through what this government has been trying to avoid: a comprehensive pension reform. In this case too, reform clearly means cuts. When asked where exactly he intended to make savings, a leading FDP coalition member recently coughed briefly and barely audibly something like "pension at 63". It doesn't get any more specific than that.

Now even the Liberals realize that they have to make concessions somewhere. Where exactly? Well, it's a difficult topic, but you can see that wherever there are tax concessions that cannot really be justified in terms of regulatory policy, some Liberals are now showing flexibility. They say that correcting something like this would not be a tax increase in the strict sense.

The Greens enter the boxing ring

The Greens, on the other hand, have one main concern: that everything that even smells of climate protection and transformation will now be cut. As if they were the only ones responsible for these issues within the coalition, some Greens are complaining. The truth is, of course, that in principle no one is as interested in them as they are.

14 billion euros - that's the size of the financial gap in the Climate and Transformation Fund alone, just for the coming year. For initial payments to private heating renovators, for example, or for funding notices to German steelworks that want to embark on the path to decarbonization with the support of state funds.

At the Green Party conference in Karlsruhe two weeks ago, Economics Minister Robert Habeck warned that numerous companies are currently faced with the alternative of conversion or dismantling. Right now, it is a question of reinventing the German business model. A brutal economic war is raging out there, waged with an incredible number of billions, but we Germans have just disarmed ourselves: "With the debt brake as it is, we have voluntarily tied our hands behind our backs and so we are going into the boxing match."

It's easy to imagine the atmosphere when Habeck's grand battle painting meets Lindner's petty financial policy soul in such a traffic light negotiation round. Nevertheless, all sides continue to emphasize in unison that there is trust.

But well, the Greens can do that too: if you ask the specialist politicians, they immediately come up with various things that they would cut if only they were allowed to. Always mentioned: environmentally harmful subsidies. The Federal Environment Agency regularly puts them at 60 billion euros. Appropriately enough, the same amount as is in the KTF. Or should be. But even the Greens point out that social housing is also on the list - because of concrete and land sealing. And when even the Green Youth point out that the commuter allowance cannot simply be slashed because of the threat of social upheaval, then you know that it's not going to be easy.