Budget crisis: Lindner is considering making savings in these areas

Federal Government - Budget crisis: Lindner is considering making savings in these areas

Federal Finance Minister Christian Lindner has specified the areas in which he believes savings are possible in order to close the gaps in the budget for 2024. "We will have to deal with three major cost blocks," the FDP politician told the newspapers of the Funke media group. He named the areas of social welfare, including the citizens' income, international financial aid and unspecified funding programs.

However, the coalition partner SPD not only wants to talk about savings, but is also putting the agreed waiver of tax increases up for discussion. SPD chairman Lars Klingbeil told the German Press Agency that it had been agreed in the coalition agreement that investments in the country's future should be financed with money from the coronavirus pot.

"It was derived from this that we would return to the normal situation with the debt brake and that there would be no need for a tax increase." The former has been broken by the ruling of the Federal Constitutional Court. "For us as the SPD, this of course also means that we are now talking about the other two things."

Klingbeil held out the prospect of difficult talks. These are currently taking place primarily in a three-way round with Chancellor Olaf Scholz (SPD), Vice-Chancellor Robert Habeck (Greens) and Lindner. The pressure is high: the coalition must reach an agreement within the next few days if it wants to adopt the budget for 2024 before the end of the year.

What the finance minister is now planning - and what others would like to see:

Social sector: labor market

The federal government currently spends 45 percent of its budget on social welfare. "We will look at how we can become more accurate," announced Lindner. "For example, it's about getting people into work more quickly. That benefits people and it benefits the federal budget. For example, there is a job turbo for refugees from Ukraine." This probably means that they should be placed more persistently on the labor market.

Social sector: citizen's income

With regard to the Citizen's Income, the Finance Minister pointed out that the inflation rate is developing much better than forecast when the standard rate was set for 2024. Inflation had fallen to 3.2 percent in November - the planned increase in the citizen's allowance from January is still based on inflation of 9.9 percent, as FDP parliamentary group spokesperson for social policy Pascal Kober had made clear.

Lindner said: "In the upcoming review of the gap between wages and social benefits, we will therefore have to look at the adjustment procedure. Because it must always make a noticeable difference whether someone is working or not."

However, the head of the CDU employee association CDA, Karl-Josef Laumann, rejects the idea of scrapping the increase in the citizen's income - as demanded by the CDU/CSU and the FDP. "An adjustment to the standard rates was urgently needed for the Citizen's Income," the North Rhine-Westphalian Minister of Social Affairs told the Redaktionsnetzwerk Deutschland (RND). However, he questioned whether high earners should receive support with gas and electricity costs or for home renovations or solar installations.

International financial aid

Germany is ahead in terms of development cooperation and international climate protection funding, said Lindner. "We can happily stay in first place. But perhaps the gap to second place can be reduced." The goal could be a "fairer international burden-sharing".

Subsidy programs

"There are numerous subsidies that need to be questioned as to whether they actually fulfill their objectives or have not fallen out of time," explained Lindner. However, it is still too early to name individual programs. "Otherwise this will lead to a run on subsidy programs at the last minute."

What Lindner wants to exclude from savings:

Defense

There should be no cuts to the Bundeswehr in view of the changed threat situation since the Russian attack on Ukraine. "The defense budget will remain untouched," assured Lindner.

Share pension

Lindner is also sticking to this FDP project in general: next year, twelve billion euros will flow into building up the planned capital stock. "This is not relevant for the debt brake because the payment is offset by an asset." The capital stock is to be built up bit by bit from public funds; in the longer term, its income should then stabilize pension contributions and the pension level.

Education sector?

Education Minister Bettina Stark-Watzinger, a Free Democrat like Lindner, would also like to see the planned Startchancen program of the federal government and the federal states for schools in trouble spots excluded from savings considerations. "I have no doubt that the program will start as planned in the 2024/25 school year. It is an investment in the future," she told the "Neue Osnabrücker Zeitung" (NOZ). 20 billion euros are to flow into the program over ten years.

Why savings need to be made

The Federal Constitutional Court had declared the reallocation of 60 billion euros in the 2021 budget null and void. The money had been approved as a coronavirus loan, but was subsequently to be used for climate protection and modernizing the economy. At the same time, the judges ruled that the state was not allowed to set aside emergency loans for later years. However, the federal government has done this in special pots - which is now tearing additional holes in the budget. Lindner sees a "need for action" of 17 billion euros for 2024.

More revenue - without a debt brake?

An emergency situation is to be declared once again for 2023 and the debt brake suspended as a result, but the CDU/CSU does not want to get in the way. The reason: the ongoing energy crisis following the Russian invasion of Ukraine. Klingbeil also wants the same for 2024: "The federal government must make savings. But in the end, I am of the firm political conviction: We have to declare an emergency for 2024 because I don't want to get into a situation where we play off Ukraine aid against climate investment," he said.

However, Lindner is very skeptical about this. "I am not yet convinced that a new suspension can be constitutionally justified," he confirmed in the Funke newspapers.

The CDU/CSU is also likely to be wary of this. "If the traffic light system constructs a new emergency situation, we will examine it and almost certainly take legal action," Christian Democrat Budget Committee Chairman Helge Braun told Welt am Sonntag. There is currently no reason and no constitutional possibility to present a budget for 2024 that is outside of the traditional debt rules.