SPD Pressures Scholz Over Budget Disagreements

SPD exerts pressure on Scholz over budget disagreements

The clock's ticking: SPD, Greens, and FDP aim to seal a budget deal by July 3rd. Chancellor Scholz, Vice-Chancellor Habeck, and Finance Minister Lindner are locked in negotiations. Pressure's mounting on them, with the SPD putting the heat on Scholz, while the FDP intensifies pressure on the entire traffic light coalition. Is this deal still salvageable?

A powerhouse like Niklas Füllkrug could be the traffic light coalition's knight in shining armor right now. Someone who steps up at the last minute and scores the winning goal. But unlike the Euro Championship, the traffic light coalition isn't fighting for group victory; they're battling for financial stability. The goal they desperately need is an agreement on the budget for the coming year. Unfortunately, the gap in negotiations is a lot wider than the positional difference between the German national striker's teeth. The figures in discussions are usually around 25 billion Euros plus an additional amount.

The trio of Olaf Scholz, Robert Habeck, and Christian Lindner has been battling it out over the budget for 2025 since the European elections two weeks ago. Their target is to agree on the budget by July 3rd. After this, there's a cabinet meeting where the budget will be presented. Extended negotiations are definitely possible, but they don't look promising. A resolution remains elusive. Lindner recently told the "Neue Osnabrücker Zeitung," "We haven't reached the landing zone yet."

The negotiations remain tightly under wraps, with little to no information leaking out. The party faithful are keeping a close eye on the proceedings. Tension's high. Last week, the SPD-Left launched a member initiative against a budget based on FDP policies. The main issue is the debt brake. Should it be lifted, or not? The FDP is staunchly against it, while the SPD is gradually growing more supportive of it.

SPD advocates lifting the debt brake, Scholz does not

SPD leader Saskia Esken urged against rushing into decisions, including another lifting of the debt brake, on Monday. She sees the Ukraine war as justification for this. The three major party factions — the conservative Seeheimer Kreis, the Parliamentary Left, and the Berlin Network — spoke in unison in favor of lifting the brake. "Given the extraordinary emergency situations in Ukraine and German flood areas, we should also use the exceptional regulation of the debt brake this year," demand Dorothee Martin (Network Berlin), Matthias Miersch (PL), and Dirk Wiese (Seeheimer Kreis). The SPD remains tight-lipped.

Every statement is subject to intense internal scrutiny for hidden meanings. For instance, Scholz's summer interview in ARD. "We will defend the welfare state. And we will develop it," promised the Chancellor. This statement resonated well with the SPD, signaling an increase in funds for social issues, not cuts—certainly not a spending spree, as the FDP would advocate. Even if they call it "prioritizing."

Scholz took on a characteristic Lindner phrase as well. He advocated for increasing the "Treffsicherheit" of Citizen's Income. This means no one should be forced to work to overcome their unemployment. The term "Treffsicherheit" suggests targeted aid for those truly in need. The question of who truly needs aid is highly subjective and has traditionally divided SPD and FDP.

From the SPD's perspective, the term "Treffsicherheit" carries a double meaning: Cuts. And Scholz is endorsing it? This might raise eyebrows in the SPD. But Scholz knows well: without the Liberals, the Red and Green coalition has no governing majority.

Then there was the statement on the debt brake. Scholz said, "Now it's about making our household budgets in order, going through each individual household expense line by line and not looking for the easy way out. The 'easy way out' would be to suspend the debt brake." Such phrasing may not sit well with the SPD, as it echoes the FDP's stance. Coincidentally, the FDP advocated for this supposedly easy way out the very next day. That wasn't an accident, Scholz isn't ruling it out. "What we'll do when we've done all that and see that there's still a problem to solve, we'll have to talk about it together."

FDP raises the volume

The FDP flat-out rejects tinkering with the debt brake. They couldn't be clearer: No touching the debt brake, under no circumstances. On Monday, FDP's General Secretary Bijan Djir-Sarai put it this way: "The SPD's fiscal populism, above all, is also dangerous for the future and development of our country." The Chairman of the Young Group of the FDP, Jens Teutrine, was blunt with the "Bild" newspaper: "Without the debt brake, without us."

The ongoing Ukraine conflict, according to the FDP, doesn't warrant suspending aid. They deem it as a long-term issue that can't be addressed through sudden borrowing. The Liberal party insists the war is well-known and should be funded from the budget. Furthermore, they are careful not to approve another constitutionally questionable budget, with the Federal Constitutional Court's judgment from last fall in mind.

If a consensus isn't reached, it's all over for the Traffic Light Coalition. A government unable to decide on spending and priorities is no longer a functioning government. But how can 25 billion euros be saved without cutting social services? Lindner proposes reducing taxes by abolishing the solidarity contribution for everyone, and scrapping progressive taxation, which would lead to less tax revenue.

Defense Minister Boris Pistorius, along with Foreign Minister Annalena Baerbock, Interior Minister Nancy Faeser, and Development Aid Minister Svenja Schulze, have all requested additional funds. Adjustments to the budget could save a billion here and there, or shift expenses to the next year. However, finding 25 billion euros seems challenging, to put it mildly.

On a side note, the FDP also addressed bureaucracy reduction on Monday. Their party presidium presented a paper demanding greater bureaucracy reduction in various areas. For the Liberals, reducing bureaucracy is almost as important as the debt brake. They are open to any solution that contains bureaucracy reduction, but they are not ready to give up the debt brake.

Ultimately, a compromise acceptable to all parties must be found. There are still nine days left until the cabinet meeting on July 3. It's like the 76th minute in the Germany vs. Switzerland match, but as yet, there's no clear winner in sight, and the gap is only growing wider.