24hoursworld

Budget: Christian Lindner’s latest trick saves the traffic light

It is a miraculous budget proposal: the traffic light coalition appears to be frugal – but it does not save at all. That is good for the government and even a little bit for the country.

What hadn’t been whispered about in this budget beforehand? A question of fate, an impossibility, a coalition breakdown – nothing less could be done. And after all, the coalition’s three chief negotiators, Chancellor Olaf Scholz, Finance Minister Christian Lindner and Economics Minister Robert Habeck, reportedly met 23 times to bring about the agreement – the Finance Minister apparently kept a tally. And he also noted that the three of them had probably sat together like this for around 80 hours, most recently until 5 a.m. on Friday.

Politics is always about communication (with this government even more miscommunication) and that is why such lists and calendar entries always convey messages other than the mere time spent: the compromise was really hard work, everyone had their arguments and positions, and everyone fought like a lion. This is how the great heroic stories are created, which their protagonists need later when they are supposed to sell the compromise.

The nice thing about the federal budget, however, is that in the end it’s all about numbers – lots of numbers, but you can sort them and calculate them back and forth. And when you do that, you have to wonder why the three of them talk to each other so often and why they had to wrestle for so long. The basic features of this budget, which were presented today, do not promise a fateful year in 2025, no harsh cuts and no impossibility. Rather, it is a very creative continuation of the previous financial policy line of this government: Basically, there is something for everyone.

Hard-core austerity policy looks different

This impression can be confirmed by three figures: this year, the traffic light coalition is planning to spend 489 billion euros. Next year, it will be 481 billion euros, eight billion less – almost a rounding difference in these terms. Months ago, there was talk of 50 billion euros in necessary savings, later 25 to 30 billion – and now eight. That is a saving of less than two percent of the entire budget.

And after 23 meetings and 80 hours today, Scholz, Habeck and Lindner did not present a clear plan as to who will have to do without how much in the future and where. Instead, they are planning a so-called global reduction in spending in the budget, which means that they will look again in the coming weeks and months, perhaps not until 2025, to see where else they can save money. Hard-core austerity policy looks different.

The finance minister and FDP chairman can boast that he has formally defended the debt brake. But in reality, with today’s negotiation result, Lindner has presented a new trick that will allow the provision in the Basic Law to be easily circumvented in the coming years: in future, the federal government could more easily finance major investments in rail or the expansion of motorways by no longer simply transferring the money to the railway and motorway companies, but only making it available as a subsidized loan.

Because such loans may be repaid at some point, they would be “neutral” according to the rules of the debt brake, which means that they do not count towards the maximum credit limit permitted by law.

There is a growth package in the budget – albeit a small one

Together with a few other little tricks – for example, a more favorable offsetting of interest gains for the federal government, a somewhat more relaxed approach to unforeseen expenses, all things that bring in a few billion here and there – Lindner is once again stocking the toolbox that every clever finance minister needs who does not want to be constrained too much by the debt brake. And which, unfortunately, was suddenly very empty after the constitutional judges’ budget ruling last autumn. The fact that this is achieved by the minister who stubbornly defends the German debt rule against the criticism of almost all well-known economists at home and abroad is not without a certain irony. But that is also politics.

At least the government is managing not only not to save, cut and cancel with the 2025 budget. It is also creating some leeway for another small growth package, worth around 23 billion euros, which contains a number of sensible relief measures for companies and private taxpayers: better depreciation rules, expanded research funding, better tax incentives for electric cars as company cars, higher child benefit.

The traffic light achieves three things at once

Compared to what other countries the size of Germany are doing to get their economies going and improve their competitiveness, this is far too little. It is also too little considering the huge backlogs that Germany has now built up in public administration, infrastructure and education. It will be difficult to verify whether the economy will actually grow 0.5 percentage points more in the coming year than previously assumed, as the coalition is now promising. Nevertheless, the planned relief measures make sense and are much better than nothing.

This budget compromise by the traffic light coalition achieves three things at once: It secures a struggling government the prospect of four years in office and a relatively stable situation for this country until the regular federal election in autumn 2025; it manages the communicative feat of coming across as frugal, even though it does not involve any savings; and it even offers a few positive impulses for companies and consumers, which no one had expected.

Source: Stern

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts