Budget: Next round in the traffic light budget struggle

In the traffic light coalition, the difficult search for a way out of the budget crisis is entering the next round after the SPD party conference. Chancellor Olaf Scholz (SPD) expressed his confidence at the weekend that an agreement could be reached in view of the growing pressure for unification. He ruled out cutting social benefits. The SPD delegates sent a signal in the next few days’ negotiations to suspend the debt brake again in the 2024 budget. The unions called for quick clarifications and further public investments to transform the economy into a climate-neutral economy.

Scholz, Vice Chancellor Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) were due to meet for further discussions on Sunday evening. The Chancellor said on Saturday, with a view to the struggle that has been going on for days: “We are not faced with an unsolvable task. Everyone just needs to come to an agreement now.” At the same time, he emphasized: “In such a situation there will be no dismantling of the welfare state in Germany.” Scholz also clearly acknowledged the decision to increase citizens’ money by around twelve percent at the beginning of 2024, which was questioned by the co-ruling FDP.

The SPD party conference indirectly advocated for the debt brake to be suspended again in 2024. The delegates decided unanimously that “constitutionally stipulated leeway for the budget” must be used in the interests of the population. Politically, the war in Ukraine created the prerequisites for an emergency that would enable increased borrowing. The wording could still leave room for interpretation. SPD leader Saskia Esken said: “We cannot manage the crisis from the normal budget.” The debt brake exception rule must be applied again.

Appeals from DGB and IGBCE

With the party conference vote, Scholz goes into further negotiations. Lindner recently made it clear that arguments for suspending the debt brake did not currently convince him. The three traffic light leaders are struggling to plug a 17 billion euro hole in the 2024 budget and to enable investments in climate protection and the modernization of the economy in the next few years. Scholz admitted that the situation was very difficult, “especially when you can’t just do it the way you think is right, but also have to come to an agreement with others.”

The German Federation of Trade Unions (DGB), IG Metall and IG Mining, Chemistry, Energy (IGBCE) appealed to the government to quickly find viable solutions. Now it will be decided whether Germany will remain a strong industrial country with good jobs, said IG Metall Vice Jürgen Kerner on Sunday. “For this to succeed, we need a state that is capable of acting and investing in the future.” DGB chairwoman Yasmin Fahimi warned that now is not the time for party political banter. IGBCE boss Michael Vassiliadis emphasized that the development of a climate-neutral economy must be boosted with massive public investment incentives, “because the market alone will not do it.”

The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, told the “Handelsblatt” that it was now the FDP’s turn and had to give up one of its two red lines. “Complying with the debt brake while at the same time refusing to place greater burdens on high earners and the very wealthy and to reduce tax privileges is incompatible.” Social Minister Hubertus Heil (SPD) said on Phoenix that everyone had to move forward in the negotiations and make compromises in the end. “We will also have to talk about the effectiveness of the welfare state, but not about social cuts.” When it comes to pensions, stability is also needed for future generations.

Juso chairman Philipp Türmer also called for clarity. “With every day that passes, the uncertainty increases,” said the head of the SPD youth organization to the Phoenix broadcaster. You would have to suspend the debt brake for 2024, then you would “definitely have at least six months before budget consultations go back to find a solution.”