Budget showdown - High tension in the traffic light budget dispute - will a breakthrough be achieved?
The SPD is struggling, the FDP refuses to be put under pressure: It is still completely open whether an agreement on the budget plan 2025 will be reached in the traffic light coalition negotiations by Friday. Chancellor Olaf Scholz (SPD), Vice-Chancellor Robert Habeck (Greens), and Finance Minister Christian Lindner (FDP) met again in the Chancellery in the afternoon for another of countless rounds of negotiations in the past months.
Whether it will be the decisive one was still completely unclear at the beginning. Discussions were expected to go on deep into the night. However, it was already clear by around 6:50 am on Friday morning that it was time to call it a day. Scholz then had to report to the SPD fraction, even if there had been no breakthrough by then.
Lindner: "We must deliberate carefully"
The SPD fraction had already scheduled a special session for Wednesday. The reason: It was the last sitting day before the parliamentary summer recess and the MPs wanted clarity.
Lindner rejected pressure for a quick agreement. "We must deliberate carefully. It's about the stability of our state finances in a turbulent world situation," said the FDP politician to the German Press Agency.
Turbo instead of Wumms
They are also negotiating about a package of measures to get the weak economy back in swing. The Chancellor calls it "growth turbo". Previous aid packages he had dubbed "Wumms" or "Bazooka".
Scholz, Habeck and Lindner had wanted to reach an understanding by this Wednesday. The 17th of July is now being discussed for the cabinet decision. In order to meet this deadline, however, a quick consensus on principles is necessary, because the drafting of the budget law usually takes about ten days. The Bundestag will then deal with the budget draft from mid-September, which could then be passed in November or December.
Still billion-dollar gaps
The individual items have been largely agreed upon, but it is reportedly still disputed above all the social budget. In addition, there is still a gap of around 10 billion euros that needs to be closed. The SPD is pushing for the financial burden of the Ukraine war and the debt brake to be postponed again in order to have more room for investments. For Lindner's FDP, this is not an option. The SPD rejects cuts in the social budget.
In addition, there are also discussions about possible cuts in the climate and transformation fund - from this special pot, the federal government finances projects for more climate protection. Due to a ruling by the Federal Constitutional Court, there are billions missing in this pot.
Scholz bets on 1-0 for Germany - and for the traffic light coalition?
Scholz did not refer to the budget negotiations at the ceremony for the 75th anniversary of the Association of Municipal Utilities in Berlin. He appealed in his speech, however, generally for more confidence in Germany. "Confidence is the engine of modernity," he said. Germany is currently receiving a lot in difficult times with an unruffled reliability.
Confidently, Scholz also expressed his expectations for the European Football Championship quarterfinals, for which he anticipates a narrow victory for the German team. In response to a question about his tip, he said: "Well, 1:0 for Germany." Scholz will be present live on Friday at 18:00 in Stuttgart when the German team faces Spain. Whether he will have a budget agreement in his pocket for the household dispute is uncertain.
Lindner: Courage for Priorities
The Finance Minister spoke cautiously. "There's still a lot of work to be done," said Lindner at an event in his ministry. "Our country doesn't have a shortage of money, but often only a shortage of courage to set priorities."
Lindner once again advocated for cuts in social spending. Since 2022, there have been 15 billion euros more in social spending solely due to the expansion of benefits and the introduction of new benefits. Lindner mentioned the child supplement, the expansion of housing benefits, and the Germany ticket in local and regional transportation for 49 euros a month as examples. Lindner added that, in the context of the "economic transition" and the activation of the labor market, there would "unavoidably" have to be measures regarding citizens' benefits.
Growth Package Intended to Boost Growth
In Germany, only minimal growth is expected this year. Companies are holding back on investments, and private consumption is not picking up. Economic associations have long been complaining about disadvantages such as high tax and tax burdens, a lack of skilled labor, and excessive bureaucracy.
The government plans to tackle this with the "growth turbo." Scholz had already stated that the federal government intends to encourage private investments. He offered improved tax deductions for companies. Additionally, the self-employment activity of parents should be made easier, and employment incentives should be increased, even tax-related ones.
Supplementary Budget Expected
In the context of negotiations on the 2025 federal budget and a growth package, it is expected that the federal government will bring a supplementary budget for this year onto the market. This would provide the government with more financial leeway. Since the German economy is weaker than expected, the conjunctural component in the debt brake allows for a larger net credit take-up. This could amount to up to eleven billion euros. So far, a net credit take-up of 39 billion euros was planned for the current year within the framework of the debt brake.
- Despite the FDP's refusal to be pressured, the outcome of an agreement on the budget plan 2025 in the traffic light coalition negotiations remains uncertain.
- The SPD fraction is scheduled for a special session to seek clarity on the budget plan 2025 before the parliamentary summer recess.
- Christian Lindner, the Finance Minister of the FDP, emphasized the importance of careful deliberation in light of the state finances' stability in a turbulent world situation.
- Scholz, Habeck, and Lindner are negotiating a package of measures to boost the weak economy, which Scholz refers to as "growth turbo".
- The Chancellor and his colleagues aim to reach an understanding by July 17 for the cabinet decision, but a quick consensus on principles is necessary to meet this deadline.
- The SPD is pushing for more room for investments by postponing the financial burden of the Ukraine war and the debt brake, while Lindner's FDP opposes such an approach.
- There are ongoing discussions about possible cuts in the climate and transformation fund, which is essential for financing more climate protection projects.
- The German government plans to tackle economic challenges with a "growth turbo" and introduce improved tax deductions for companies, among other measures, as part of the supplementary budget expected this year.
