Lindner sees the money going out
At the presentation of the federal budget approved by the Federal Cabinet, Federal Finance Minister Lindner does not hide the fact that this agreement was quite difficult. The really tough decisions still lie ahead for Germany.
"The traffic light coalition went to the limits of compromise" to secure a budget for the coming year, says Federal Finance Minister Christian Lindner at the presentation of the package passed by the Federal Cabinet on Wednesday. The difficulty of this agreement for the traffic light coalition can be seen in a number: Planned expenditures of 17 billion Euro have not been covered by revenues or loans so far.
At least 8 billion of this will be covered by Lindner by converting grants to Bahn and Autobahn GmbH into loans and transferring surpluses of the KfW development bank from the gas price brake into the federal budget. By early August, an independent expert is expected to report on whether this is legally permissible. If not, the coalition will have to reform again.
Even if it is legally possible, 9 billion Euro remain uncovered, which hopefully will not be needed. "That's state practice, that's experience knowledge, that's serious," Lindner defends against criticism from the opposition and the media about this so-called minor cutback. "Approximately 2% are the funds that simply remain," says Lindner about the 9 billion Euro share of the total budget of 480 billion. However, if these funds are firmly planned, they are also missing as a buffer.
2028, 39 billion Euro are missing already
The - depending on the calculation - 9 to 17 billion Euro gap continues and grows even further: With 13 billion each, Lindner calculates for 2026 and 2027. In the following year, it is already 39 billion Euro, because then the special fund for the strengthening of the Bundeswehr has been used up. Since Germany still wants to fulfill the NATO agreement on defense expenditures in the amount of 2% of the gross national product (GNP), an additional 28 billion Euro would have to flow from the regular budget to the Bundeswehr. In the face of conflicts with Russia and China, this requirement could also still significantly increase.
"That is a political decision we have to make and implement now," says Lindner. Rising defense and social expenditures pose a financing question for Germany. Lindner's answer is clear and expected: He wants to increase revenues through more economic growth. "In my opinion, there are no other options than to strengthen the growth path of the economy through structural reforms and economic friendliness." For this, however, a figure significantly larger than 2 must permanently precede the decimal point of annual growth. The traffic light coalition is aiming for 0.9 to 1% growth for 2025, and even that is ambitious.
Higher tax revenues through higher debt quotas would also encourage other EU countries to grant more loans. "We have to lead by example in fiscal policy," Lindner warns. By the end of the decade, Germany could reduce its government debt ratio to EU-compliant 60%. At least, this value has already dropped from 69 to 63%, which is a significant reason for Germany's excellent creditworthiness on financial markets, which also leads to lower interest rates. With annual new borrowing of 50 billion Euro within the debt brake, this is a significant amount.
Lindner wants to continue
Lindner wants to continue.
Lindner's premises in the traffic light coalition are more contested than expected. In particular, the SPD is warning that the discussion about suspending the debt brake is not yet concluded. However, Lindner, as FDP chairman, reminds in this capacity of the coalition agreement, which neither provides for additional burdens for citizens nor reforms of debt rules. And suspending it due to the follow-up costs of the Ukrainian war is neither economically sensible nor legally secured, says Lindner. He is "personally very motivated" to continue his work as Finance Minister.
Logically, if the FDP is not part of the next federal government, a Union-led coalition with SPD or Greens could potentially relax the debt brake in favor of larger investment volumes.
Above all, CDU-led state governments are openly opposed to this, as they are suffering from tight budgets under the narrow debt constraint. This is a problem for short-term plans: they should first give up revenues for more economic growth. The growth initiative of the traffic light government, together with the budget, is negotiated as such. Lower revenues result from the possibility for companies to deduct investments and research expenses from their tax liability to a greater extent than before.
Will the states go along with it?
However, Lindner's favorite project still stands in the way: the relief of employees by 23 billion euros. That much costs the adjustment of tax brackets to offset inflationary effects on wages. Already from the first state governments, there were grumblings about it. "I advise against telling citizens and taxpayers that the state now wants to profit from inflation," Lindner counters these voices.
The FDP chairman Lindner managed to push through the equalization of the cold progression against SPD and Greens in the federal government. However, if the states have to approve the lower revenues in the Bundesrat, the FDP only sits at the cabinet table in Rhineland-Palatinate and Saxony-Anhalt. The approvals for the changes in child benefit also have to pass both parliaments. The expected effects on labor market integration are therefore crucial to Lindner. He repeatedly reminds of the high costs of citizens' aid and other social benefits for refugees from their countries of origin in Germany. "Work and integration" are therefore the best way to reduce the burgeoning child benefit costs. Integration into the labor market is also "a moral imperative".
In response to a journalist's comment that, in particular, Ukrainian women are not working due to a lack of kindergarten places, Lindner does not disagree. However, financing and providing kindergarten places is "a matter for state politics and also for cities and municipalities". Nevertheless, the federal government will voluntarily provide two billion euros for kindergarten expansion in 2025. "I also prefer the term early childhood education because development in early childhood also includes language and personality development." It is rather surprising that this Bundesfinanzminister deals with such topics in addition.
- Given the growing gap between planned expenditures and revenues in German defense policy, Federal Finance Minister Christian Lindner advocates for increasing revenues through economic growth and structural reforms, stating that "there are no other options than to strengthen the growth path of the economy through structural reforms and economic friendliness."
- The traffic light coalition, including the FDP, faces internal challenges as Lindner's premises are more contested than expected, particularly by the SPD, who are warning that the discussion about suspending the debt brake is not yet concluded.
- In regards to the defense budget, Christian Lindner, as FDP chairman, emphasizes the importance of Germany fulfilling its NATO agreement on defense expenditures and emphasizes that this will require additional funding, stating that "that is a political decision we have to make and implement now."
