Budget: traffic light under pressure to make a decision – dispute over social budget

The traffic light coalition is under great pressure to make decisions 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 next course in view of billions in holes after the Federal Constitutional Court’s budget ruling.

Possible savings, especially 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 Conference in Dubai and the region planned from Monday evening. A spokeswoman for the Ministry of Economic Affairs said Habeck’s presence in Berlin was necessary to further advance talks on the 2024 budget following the Federal Constitutional Court’s ruling. 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 in these very hours. Every free minute among the members of the government is being used to draw up a draft budget for 2024 in accordance with the provisions of the Constitutional Court ruling from Karlsruhe .”

Why savings need to be made

The Federal Constitutional Court had declared the reallocation of 60 billion euros in the 2021 budget to the climate and transformation fund to be null and void. The money was approved as a Corona loan, but was subsequently intended to be used for climate protection and the modernization of the economy. At the same time, the judges decided that the state was not allowed to set aside emergency loans for later years. But the federal government did this in special funds – which is now tearing additional holes in the budget. Lindner sees a “need for action” of 17 billion euros for 2024.

What the schedule looks like

The coalition must reach an agreement within the next few days – if it wants to decide on the budget for 2024 this year. There should be a basic political agreement between the SPD, FDP and the Greens by the cabinet meeting on Wednesday so that there is still enough time for the parliamentary procedure. The SPD party conference will take place in Berlin from December 8th to 10th. It is also possible that there will be an agreement in principle before Christmas, but the budget will not be formally passed by Parliament until the beginning of next year. If there is no political agreement before Christmas, there is a risk of a stalemate. The traffic light could get into difficult political waters.

Which cost blocks Lindner names

At the weekend, possible savings in social spending became the focus of the public debate. Lindner told the newspapers of the Funke media group that the social sector was one of three large cost blocks that the traffic light had to deal with – alongside international financial aid and unspecified funding programs. The Greens have spoken out in favor of reducing climate-damaging subsidies. According to Lindner, there should be no cuts in the Bundeswehr in view of the changed threat situation since the Russian attack on Ukraine. The federal government currently spends 45 percent of its spending on social issues, said Lindner. “We’ll see how we can become more accurate.” For example, it’s about getting people into work more quickly. This benefits people and also the federal budget.

Dispute over increase in citizen’s allowance

According to Traffic Light’s plans, the more than five million recipients of citizens’ benefit should receive an average of around 12 percent more money by January 1, 2024 – single people will then receive 563 euros. In contrast to previous adjustments, the sharply increased inflation for months was taken into greater account in the calculation for 2024 due to a change in the rules.

Lindner pointed out that the inflation rate is developing significantly better than predicted when the standard rate was set for 2024. Inflation fell to 3.2 percent in November – the planned increase in citizens’ benefits from January is still based on inflation of 9.9 percent, as the social policy FDP parliamentary group spokesman Pascal Kober made clear.

FDP General Secretary Bijan Djir-Sarai also called for the significant increase in citizens’ money to be reversed. He told “Bild am Sonntag” that it was urgently necessary to reevaluate citizens’ money.

The SPD wants to oppose cuts in the social sector. Social Minister Hubertus Heil had already rejected calls for a suspension of the increase in citizens’ benefits. 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 there is no austerity budget, that the poorest are not the ones who suffer.”

SPD leader Saskia Esken expects that the federal budget for 2024 can be finalized this year. She spoke out to the Düsseldorf “Rheinische Post” against cuts in social benefits and cuts in climate protection.

Emergency again?

An emergency should be declared again for 2023 and the debt brake should be suspended; the Union does not want to stand in the way. Reason: the ongoing energy crisis after the Russian attack on Ukraine. SPD leader Lars Klingbeil also wants this for 2024: “There has to be savings from the federal government. 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 have to Playing off Ukraine aid against climate investment,” he told the German Press Agency. But Lindner is very skeptical about this: “I’m not yet convinced that a new suspension can be justified in a constitutionally viable manner.”

Warning of rising electricity prices

The coalition has actually planned a federal subsidy for transmission network fees of up to 5.5 billion euros next year – in order to curb the price of electricity. The money should come from the economic stabilization fund. However, as a result of the budget ruling, the federal government must liquidate this special pot at the end of the year. The money for the subsidy would 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 Federal Association of the Energy and Water Industry. “An affordable power supply is of great importance – also from a socio-political point of view – especially in times of uncertainty.”