Traffic lights under pressure to make decisions

The coalition government is under great pressure to make a decision in the budget crisis. If the 2024 federal budget is to be passed this year, the SPD, FDP and Greens will soon have to agree on the future course in view of the billions of euros in shortfalls following the Federal Constitutional Court's budget ruling.

Possible savings, particularly in social spending, are controversial. The negotiations are currently taking place primarily in a three-way round with Chancellor Olaf Scholz(SPD), Vice-Chancellor Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP).

The talks appear to be entering the decisive phase: Economics and Climate Protection Minister Habeck canceled a trip to the World Climate Change Conference in Dubai and the region planned from Monday evening. Habeck's presence in Berlin was necessary in order to make further progress in the talks on the 2024 budget following the ruling by the Federal Constitutional Court, a spokeswoman for the Ministry of Economic Affairs announced. This was done in consultation with Scholz and at the request of the Chancellor.

SPD General Secretary Kevin Kühnert said on the ZDF program"Berlin direkt": "Negotiations are taking place right now. Every free minute is being used by the members of the government to draw up a draft budget for 2024 in accordance with the requirements of the constitutional court ruling from Karlsruhe."

Why savings must be made

The Federal Constitutional Court had declared the reallocation of 60 billion euros in the 2021 budget to the Climate and Transformation Fund null and void. The money had been approved as a coronavirus loan, but was subsequently to be used for climate protection and the modernization of the economy. At the same time, the judges ruled that the state was not allowed to set aside emergency loans for later years. However, the federal government has done this in special pots - which is now tearing additional holes in the budget. Lindner sees a "need for action" of 17 billion euros for 2024.

What the timetable looks like

The coalition must reach an agreement within the next few days if it wants to adopt the budget for 2024 this year. The SPD, FDP and Greens must reach a political agreement in principle by the cabinet meeting on Wednesday so that there is still enough time for the parliamentary process. The SPD party conference will take place in Berlin from December 8 to 10. It is also possible that there will be an agreement in principle before Christmas, but that the budget will not be formally adopted by parliament until the beginning of next year. If there is no political agreement before Christmas, there is a risk of a deadlock. The traffic light government could find itself in difficult political waters.

Which cost blocks Lindner mentions

At the weekend, possible savings in social spending became the focus of public debate. Lindner told the Funke media group newspapers that the social sector was one of three major cost blocks that the traffic light government would have to deal with - in addition to international financial aid and unspecified support programs. The Greens have spoken out in favor of reducing climate-damaging subsidies. According to Lindner, there should be no cuts to the Bundeswehr in view of the changed threat situation since the Russian invasion of Ukraine. According to Lindner, the federal government currently spends 45% of its budget on social issues. "We will look at how we can become more effective." For example, the aim is to get people into work more quickly. This would benefit people and also the federal budget.

Dispute over citizen's allowance increase

According to the traffic light plans, the more than five million citizens' income recipients are to receive an average of around 12 percent more money from January 1, 2024 - single people will then receive 563 euros. In contrast to previous adjustments, inflation, which had risen sharply for months, had been taken into account to a greater extent in the calculation for 2024 due to a change in the rules.

Lindner pointed out that the inflation rate is developing much better than predicted when the standard rate was set for 2024. Inflation had fallen to 3.2 percent in November - the planned increase in the Citizen's Income from January is still based on inflation of 9.9 percent, as FDP parliamentary group spokesperson for social policy Pascal Kober had made clear.

FDP General Secretary Bijan Djir-Sarai also called for the significant increase in the citizen's income to be reversed. He told the newspaper "Bild am Sonntag" that it was urgently necessary to reassess the citizen's income.

The SPD wants to oppose cuts in the social sector. Social Affairs Minister Hubertus Heil had already rejected calls to suspend the increase in the Citizen's Income. SPD General Secretary Kevin Kühnert said on Saturday at a party conference of the Thuringian Social Democrats in Meiningen: "The SPD is fighting to ensure that it does not become an austerity budget and that the poorest do not suffer."

SPD leader Saskia Esken expects the federal budget for 2024 to be finalized this year. She spoke to the Düsseldorfer "Rheinische Post" against cuts to social benefits and climate protection.

Another emergency?

An emergency situation is to be declared once again for 2023 and the debt brake suspended as a result, but the CDU/CSU does not intend to stand in the way. The reason: the ongoing energy crisis following the Russian invasion of Ukraine. SPD leader Lars Klingbeil wants the same for 2024: "The federal government must make savings. But in the end, I am of the firm political conviction: We have to declare an emergency for 2024 because I don't want to get into a situation where we play off Ukraine aid against climate investment," he told the German Press Agency. However, Lindner is very skeptical about this: "I am not yet convinced that a new suspension can be constitutionally justified."

Warning of rising electricity prices

The coalition has actually planned a federal subsidy of up to 5.5 billion euros for the transmission grid fees in the coming year - to curb the price of electricity. The money was to come from the economic stabilization fund. However, as a result of the budget ruling, the federal government will have to dissolve this special fund at the end of the year. The money for the subsidy would therefore have to come from the core budget. Without the subsidy, end customer prices would rise significantly, said Kerstin Andreae, Chairwoman of the Executive Board of the German Association of Energy and Water Industries. "An affordable electricity supply is of great importance, especially in times of uncertainty - also from a socio-political perspective."