Chancellor Olaf Scholz (SPD) is not a great orator or visionary, but with Scholz, it was long believed among many German citizens, at least there is an experienced professional at the helm. But more than two years after his election win in September 2021, the German chancellor’s image has suffered major dents. The most recent was a blow from the Constitutional Court in Karlsruhe. Last week, the Court ruled that the 2021 budget is unconstitutional, leaving the coalition with a 60 billion euro hole in the budget. The budget deficit is causing great unrest in the coalition of SPD, Greens and FDP. And Scholz, as former Minister of Finance (2018-2021), should have prevented this budget blunder, many critics believe.
In the spring of 2021, 60 billion euros were withdrawn under the Merkel government to contain the corona crisis. That money ultimately turned out not to be necessary for the pandemic, so the Scholz government transferred the amount to a fund for the energy transition. That trick, the Karlsruhe Court ruled last week, is against the law, and the money must be returned. This is a fundamental problem for the coalition, because the money for the transition fund formed a kind of kit between the Greens and the liberal FDP: the Greens want to invest in making industry and energy supplies more sustainable, and the FDP wants to adhere to the strict German budget rules. . With the fund, Scholz responded to both coalition partners.
The Scholz government is choking on the famous German these days Schuldenbremse, a law that should keep the budget deficit manageable. According to many economists it is Schuldenbremse outdated, because investments must be made in the transition of the industry and also in defense. In emergencies, such as a pandemic, the budget rule may be suspended.
But for the liberal FDP the Schuldenbremse a sacred house. On Thursday, Finance Minister and FDP chairman Christian Lindner said in a short and very veiled statement that he would indeed vote for 2023. Schuldenbremse will deport, a decision that must be approved by a majority in the Bundestag. The money for the transition fund will then be included in the 2023 budget.
Lindner also announced that significant savings will be made again in 2024. On Friday, Lindner also dismissed State Secretary Werner Gatzer, who as State Secretary for Finance has been watching over the budgets of successive ministers for eighteen years. Gatzer is seen as one of the architects of the trick that is now shaking the coalition, and is of course at the same time a suitable lightning rod for Lindner and Scholz.
Lindner has cosmetically solved the acute shortage, but the fundamental problem remains. For the 2024 budget, the wishes of the coalition partners will collide without cushioning savings. The SPD wants higher taxes, the FDP certainly does not.
The Greens want to make the industry future-proof through investments, the FDP is counting on the market for this. The FDP wants to reduce social benefits, but increasing them is the SPD’s main theme. To reconcile all these interests, Olaf Scholz will have to take leadership, more than in the first two years of his term of office.
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