Lindner issues warnings to the coalition members in Latin.
The government's financial situation is not looking great as the updated tax estimate shows. Christian Lindner, the Finance Minister, shared this news with the traffic light partners in a bold Latin phrase, hinting at the challenges ahead.
The disappointing news comes as the traffic light coalition anticipates a revenue decrease, with 5.6 billion euros missing in their coffers this year and a further shortfall of 11 billion euros next year. By 2028, the federal and state governments could potentially lose up to 80 billion euros. This figure is significantly lower than what was predicted in the last tax estimate back in the fall. Lindner explained the drop in revenue was due to factors like the cut in electricity tax that were not foreseen at the time. "Nonetheless, we are over two billion euros short of what we had expected."
The situation is especially tense for the Ampel government as they face tough budget negotiations. The outcome will be critical for the coalition's survival. If they fail, the federal government could disintegrate.
Lindner is diligent in his approach, elaborately drawing out his point to his fellow party members: "Spending should be strategically allocated in a manner that fuels economic growth." Essentially, he's saying they must use the limited resources wisely and not blindly increase social spending.
Paradoxically, the task sounds simple, but it proves more difficult in practice. Where should the savings come from? Should they cut funds related to the military or climate initiatives? Or should they trim back on social welfare programs? There are valid arguments against any one of these options.
Budget negotiations have always been a challenge. But this time, it's even more complicated. The Federal Constitutional Court's ruling from November complicated matters further by making it difficult for the government to stretch their financial resources beyond the debt brake. Money is tighter than ever.
However, this isn't the only reason for the legendary complexity in this particular budget dispute. The diverging desires and priorities of the SPD, Greens, and FDP make it even more challenging. The SPD and Greens are more focused on supporting those in need, combatting the climate crisis, and expanding social benefits, whereas the FDP prioritizes easing the burden on businesses. Finding a balance remains tricky.
The debate over the debt brake is fueling the ongoing conflict. Many believe its implementation should be relaxed, but Lindner is committed to its stability, citing the potential consequence of a crippling interest burden in the future. Some economists like Michael Hüther and Sebastian Dullien agree with the idea of loosening the debt brake, but Lindner is not budging from his position.
This discussion goes beyond the common disagreements over the debt brake. The rift between the parties has grown progressively worse. After receiving spending limits from Scholz and Habeck, Lindner asked each ministry to submit a budget, each well within the allocation. As expected, not everyone complied. Baerbock, Schulze, and Pistorius all sought additional funds. The consequences of their requests: Lindner questioned social spending plans and aimed to eliminate the 63-year-old retirement age, a major priority for the SPD. The chaos continues.
Lindner shied away from divulging the exact amount of money needed to be found for the budget. He mentioned a gap between 10-20 billion euros. So it's safe to say, there's at least 10 billion euros missing from the budget. In recent months, the estimates of missing funds have gone as high as 25 billion euros. Given the rocky road to compromise and the varying requests from each ministry, finding common ground to craft a compromise seems anything but certain.
The clock ticks on, with budget negotiations now underway in their crucial final stages. The parties better buckle down and find common ground as there's not much time left - just [exactly remaining days to the deadline].
Lindner is pushing for more than just the prevention of cold progression; he wants to lower taxes as well. According to him, if a person's salary increases only to match inflation, it's essentially a stealth tax hike. "I can't find that acceptable," he exclaims. Then he delivers a bold statement in Latin, translating to "it's a sine qua non for me that cold progression is also excluded for people in 2025 and 2026, and that there's relief." Conditio sine qua non means a certain condition has to be fulfilled. What if the condition isn't met? There's no budget. And if a government can't manage its finances, it's doomed to fail. If the defusing of this financial time bomb doesn't work, we're in big trouble.
First, there needs to be agreement within the federal government. Different factions have varying demands. Some want a higher minimum wage, while others prefer to get rid of the solidarity surcharge. The SPD supports the former, and the FDP is in favor of the latter. "We will now work to bring these two positions together," says Lindner. The goal is to finalize the budget by July 3, in the last cabinet meeting before the summer break. That leaves us with seven weeks until then.
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The FDP, a part of the Traffic light coalition, shares Lindner's concerns about the financial situation, which is exacerbated by the decrease in tax revenue as predicted in the updated estimate. The SPD and Alliance 90/The Greens, also coalition partners, aim to support those in need, combat climate crisis, and expand social benefits, but their priorities differ from the FDP's focus on easing business burden. Olaf Scholz, the Chancellor, and Robert Habeck, the Finance Minister in the Federal Ministry of Finance, are tasked with navigating these differing perspectives to craft a budget policy that balances these priorities while adhering to the debt brake. Despite Lindner's call for strategic allocation of resources, finding common ground remains challenging due to budgetary constraints and conflicting priorities.
Source: www.ntv.de
