The end of the traffic lights has been averted - for now
It was long, it was close: In another lengthy night session, SPD, Greens, and FDP reached a preliminary compromise for the budget 2025 and for more growth. Even the Chancellor refrains from triumphant gestures after looking into the abyss. This is because his party is making the loudest noise.
The Federal Finance Minister is responsible for the numbers. More than 80 hours have been spent in budget talks with Chancellor Olaf Scholz and Economics Minister Robert Habeck, says Christian Lindner before the assembled press in the capital. And look there: At the end of a sleepless night, there is not only a budget draft but also a package for the economic stimulus.
The traffic light coalition can continue to govern, for now. The first condition is that the all-nighter has not left deep traces. Lindner winks in quick succession. The Chancellor's voice is hoarse, he stutters occasionally during the presentation of the negotiation results. The second condition is that the sum of projects actually goes through the parliaments and that the found solutions for closing the last budget gaps prove to be feasible. By July 17, Lindner intends to submit a draft, which the cabinet should then approve. After that, the Bundestag is in session.
Chancellor satisfied, but does not triumph
Perhaps not even Lindner, the numbers-savvy one, has prepared the sum of all the previous showdowns of this coalition. It was as heated as in that July night, but still not quite that hot: a serious break of the SPD, Greens, and FDP coalition was a real possibility. As late as Thursday, it was still unclear how a solution would look. A lower two-billion-euro gap was still open in the budget 2025. Lindner had ruled out the suspension of the debt brake as categorically as an additional burden for citizens.
Even until midnight, the participants were not sure if they would find an alternative solution. Several Social Democrats and Greens emphasized in off-the-record talks: A government collapse was damn close. And it's still not completely ruled out. After the night session, there is still a gap of up to 16 billion euros to be filled: 8 billion should come from a changed financing of federal-owned companies like the Autobahn GmbH. Whether it will work is uncertain. In addition, 8 billion more must be saved by the ministries if all the funds assigned to them are fully used up.
"An impressive collective product," says Scholz. "I am convinced that this is a very successful solution." Triumphant gestures over the journalists and journalists who had speculated about the collapse of his government, the Chancellor spares himself this time. He cannot deny the seriousness of the situation either. Perhaps he is just too tired for triumphant displays on Friday morning. When he presents the agreements of his SPD fraction early in the morning, the enthusiasm there remains in check. The SPD deputies had spoken passionately for the suspension of the debt brake.
Some deputies have appeared at the special sessions of SPD and Greens in the German Bundestag with luggage. For them, it's going home this day as the two-month parliamentary summer break begins. SPD-Faction Leader Rolf Mützenich stresses the importance of "clarity" for the deputies before they return to their constituencies. This clarity, he says, is the achievement of his faction, which had pressed the Chancellor for information up until this Friday.
However, Mützenich is not yet fully convinced by the results. "It's about how we evaluate it, so I'm keeping this instrument for myself for the time being," says the SPD faction leader about the suspension of the debt brake. "If it's necessary, we'll continue to bring up this issue in our discussions with our coalition partners."
Thick Frogs for the Chancellor Party
"A lot of tricks were necessary to settle the budget," Mützenich says, attacking Lindner and the FDP sharply. The Federal Finance Minister had not fulfilled his duties, forcing the Chancellor to intervene in the budget negotiations. Mützenich redirects the frustration of his colleagues towards the coalition partner, away from Scholz. However, he had never shown that he wanted to suspend the debt brake.
The SPD paper contains a few thick pieces: The German Supply Chain Act is to be replaced by the implementation of the new EU directive on the same topic as soon as possible. According to Lindner, two-thirds of the bureaucratically expensive documentation requirements for companies will fall away. Additionally, the agreed-upon complications in the acquisition of citizens' money do not meet the expectations of the Chancellor party. Bundesverteidigungsminister Boris Pistorius, instead of the demanded 6.7 billion euros, receives only 1 billion euros. However, Lindner was able to push through the "cold progression": Net income should not be eaten up by inflation. The tax brackets are accordingly adjusted.
Lindner emphasizes in front of the press that the SPD did not receive an increase in the minimum wage, just as the FDP did not achieve a complete elimination of the solidarity contribution for the top ten percent of incomes. Measured against the previously published positions, the SPD appears as a loser in these negotiations, the FDP as a winner. Lindner can say: A budget that provides for numerous investments is also possible without bypassing the debt brake.
Very many uncertainties
The proof is still far from being provided: The package is as ambitious as it is uncertain in implementation: An additional 0.5 percentage points of economic growth are expected from the so-called Growth Initiative. This consists of not only new 49 measures. New are tax reliefs and research funding for companies, easier labor market access for foreigners, incentives for pensioners, and tax-free overtime. The handling of the Supply Chain Act is also part of this, further bureaucracy reduction is intended. However, all this must first go through the Bundestag and Bundesrat. Longer and more extensive write-offs ultimately also go at the expense of the tax revenues of the states.
The embedded revenues above 5 Billion Euro and the lower expenditures on citizen's pension are to be established first. The withdrawal of EEG compensation payments to Producers of Renewable Energy from the budget is also a variable, as the electricity prices are volatile. If things run poorly, the traffic light coalition will have to negotiate a comprehensive supplementary budget in the spring. And this in the already heated Bundestag election campaign.
"Economy, Climate, Children"
Unlike in most phases of the traffic light coalition, the conflict unfolded significantly less between the FDP and the Greens than between the FDP and the SPD. Habeck's party had publicly distanced itself in the past few weeks. The demands of Federal Foreign Minister Annalena Baerbock for more money were indeed part of the budget conflict. However, it was understood in the night that she would be granted the required funds for humanitarian aid in the context of a supplementary budget 2025, should there be humanitarian disasters. Another variable size.
Federal Family Minister Lisa Paus also had to give in: The child benefit, as planned by her, will not come first. Whether the up to 5000 new positions for processing the child benefit will be created, is completely open. The Greens, however, had already proposed a phased introduction of the child benefit during the past weeks due to resistance from FDP and SPD. Now, in addition to the child benefit, the child supplement is also being increased by 5 Euro for at-risk children. The Greens also expect to have secured 2 Billion Euro for the expansion and improvement of kindergartens. The SPD considers this a success as well.
The Trio is betting on victory
"Economy, Climate, Children" is the motto of this budget, says Habeck. Vice Chancellor Habeck is satisfied, as the Climate and Transformation Fund is only slightly reduced. The funds for the economic transition to Renewable Energy remain largely intact. In addition, there are extra depreciations for E-Cars in government vehicle fleets and agreements for the expansion of charging infrastructure in his area, which even exceeds his expectations.
Thus, the Minister can relax and watch the European Championship match against Spain in the evening. Scholz flies to Stuttgart specifically in the afternoon. Lindner probably only looks, if he has managed to get some sleep by then. At the end of their press conference, the three give their powerful agreement. The Chancellor bets on a 1:0 for Germany, Lindner says "2:1" and the enthusiastic Habeck even "3:1". However, this is also a form of unity: Together, the traffic light coalition leadership is betting on victory. This was not to be expected just a short while ago. Neither from the German football team, nor from the federal government.
- The budget policy discussions between SPD, Greens, and FDP resulted in a preliminary agreement for the budget 2025 and economic stimulus programs, under the oversight of Federal Finance Minister Christian Lindner and Chancellor Olaf Scholz.
- During the negotiations, Chancellor Scholz and his party faced criticism from within their coalition, as a gap of up to 16 billion euros remained to be filled, with solutions for closing the budget gaps still uncertain.
- Despite the challenges, Olaf Scholz expressed satisfaction with the agreed-upon package, stating that it was an "impressive collective product" and a "very successful solution."
- SPD Faction Leader Rolf Mützenich remained cautious about the results, noting that he retained the option to continue pushing for the suspension of the debt brake if necessary.
- The coalition partners also reached an agreement on the Renewable Energies Act, with the Climate and Transformation Fund funds for the transition to renewable energy remaining largely intact.
- With the passage of the economic stimulus package and the budget, German ministers and politicians like Robert Habeck, Christian Lindner, and Olaf Scholz will now focus on implementing the agreed-upon measures and navigating the challenges ahead.
