Lindner wants a small reform of the debt brake

Finances - Lindner wants a small reform of the debt brake

Federal Finance Minister Christian Lindner (FDP) continues to reject a fundamental reform of the debt brake, as demanded by the SPD and the Greens - but not a partial reform. He wants to tackle this in the coming year. The level of possible debt should be more closely aligned with economic fluctuations than before.

However, some CDU/CSU minister presidents also want general changes to the mechanism for limiting national debt. They want to enable more investments that only pay off later. Others in the CDU/CSU are against this - they have now been joined by Schleswig-Holstein's head of government Daniel Günther.

Lindner told the Redaktionsnetzwerk Deutschland that there are plans to revise the calculation of the so-called economic component, which allows more leeway in the event of a downturn. However, this has nothing to do with the current budget situation of the federal government. "The intention is to adapt the calculation to the current state of economic research, which will change the fluctuation range," he explained. "However, this will not increase the potential debt over several years. This is because the greater leeway in the downturn will be recouped in the upturn," said Lindner. He wants to tackle the reform in 2024.

How will this be received in the coalition?

This reform had already been agreed in the coalition agreement, explained SPD parliamentary group deputy leader Achim Post in the Berlin newspaper "Tagesspiegel" (Sunday). "It should now be implemented very quickly."

However, the SPD and Greens are also calling for a comprehensive reform. "The topic needs to get out of the taboo zone," Andreas Audretsch, deputy leader of the Greens, told the newspaper. An investment clause is needed "to invest in climate technologies, in jobs, in climate-friendly prosperity".

What does the CDU/CSU think of Lindner's small reform?

Union faction deputy leader Mathias Middelberg (CDU) expressed skepticism about adapting the debt brake to economic fluctuations. "The debt brake is already not rigid, but has two components of flexibility, one structural and one cyclical," he told the German Press Agency in Berlin. These two components already allow new debt of more than 20 billion euros for 2024, for example, in line with the constitution. "We are therefore extremely cautious about further flexibilization of the debt brake," said the budget expert. "There must be no new trickery to circumvent this basic rule."

However, the Ministry of Finance rejects this. "The review of the so-called economic adjustment procedure has nothing to do with flexibilization or higher debt overall, as the CDU/CSU insinuates. It is merely a matter of modernizing the procedure, which has so far been heavily influenced by outdated statistical assumptions," said Lindner's department. "On a multi-year average, there is no higher scope for debt."

Could the coalition decide on an adjustment on its own?

Following the budget chaos at federal level, the debt brake enshrined in the Basic Law is being criticized because it only allows a certain amount of leeway for borrowing. A major reform demanded by the SPD and Greens requires a two-thirds majority in both the Bundestag and the Bundesrat. The FDP and large sections of the CDU/CSU are opposed to this. According to RND, an amendment to the Basic Law is not necessary to adjust the economic component. The majority of the traffic light coalition would be sufficient, as only the implementing laws of the debt brake would have to be amended.

What would be the case for a major reform?

"I consider investment in the future to be absolutely necessary," Berlin's Governing Mayor Kai Wegner (CDU) told dpa. "Neither Berlin nor other federal states nor the federal government can afford this from the budget." The investment and renovation backlog for transport routes, bridges, schools, police and fire stations is enormous because many things have been left to wear out. It is also about attracting companies, especially in the east of Germany - and about retaining these companies. Wegner also sees enormous challenges in terms of climate protection and housing construction, for example.

And what do the opponents say?

They include CDU chairman and Union parliamentary group leader Friedrich Merz, who had already rebuked Wegner for his position. Schleswig-Holstein's Minister President Günther shares Merz's view. "Nothing will improve if we incur debt for the sake of debt and shift the burden onto the next generation," he told dpa. "We must not permanently spend more money than we take in." He added: "I think the debt brake is right, as is the current set of rules."

Why has the discussion arisen?

In mid-November, the Federal Constitutional Court declared the reallocation of 60 billion euros in the 2021 budget to the climate and transformation fund null and void following a lawsuit by the CDU/CSU parliamentary group. The judges also ruled that the federal government may not set aside emergency loans for later years. This had created billions in gaps in the federal budget, which the coalition of SPD, Greens and FDP was only able to agree on how to finance after weeks of dispute this week.