– by Christian Krmer and Holger Hansen
Berlin (Reuters) – According to estimates by the Union, the federal government is heading for record debt of 250 billion euros this year.
At the beginning of the budget week in the Bundestag on Tuesday, the CDU/CSU accused Finance Minister Christian Lindner of using tricks to circumvent the debt brake and not properly defending it. FDP leader Lindner justified the planned new debt of around 200 billion euros with the consequences of the coronavirus pandemic and the necessary modernization of the Bundeswehr. In addition, there will be additional burdens from the war in the Ukraine, which Lindner cannot yet assess.
“In the crisis, the state must act,” said Lindner. The government’s aim, however, is to normalize finances again and build up buffers. The debt brake should be complied with again in 2023 and in the years up to 2026. That is also a question of credibility. The debt brake has been suspended since 2020 due to the pandemic. This year, the government wants to justify the renewed exception to the rule enshrined in the Basic Law with the Russian invasion of Ukraine.
Lindner announced an early supplementary budget. This should only include measures related to the war. This included relief for citizens and business in the course of the sharp increase in energy prices as well as aid for refugees inside and outside Germany. CDU budget politician Christian Haase estimates this at around 50 billion euros, which means that the total debt should then be around 250 billion. “You would have to prioritize tough.” But that doesn’t happen. In 2021, the federal government had already taken on a good 215 billion euros in new debt.
So far, Lindner’s draft budget for 2022, which is now being discussed in the Bundestag and is to be passed in early June, provides for 99.7 billion euros in new debt in the core budget and a special fund of 100 billion euros for the Bundeswehr. CSU regional group head Alexander Dobrindt spoke of a budget puzzle because the supplementary budget had no content yet.
UNION THREATENS TO BLOCKADE BUNDESWEHR-SPECIAL FUND
It is still unclear whether the Union will support the traffic light parties SPD, Greens and FDP in anchoring the Bundeswehr special fund in the Basic Law. The votes of the traffic light coalition are not sufficient for this. This step is intended to ensure that the funds are not misused. Dobrindt said there were talks about it this week. The 100 billion euros would have to be available exclusively for the Bundeswehr: “We will not shake hands for anything else.” Some fear that the funds could flow to partners outside the EU.
Dobrindt also criticized the fact that it was not stipulated how the special debt should be repaid. “That will not have our approval. Paying off debt is part of sound budgetary policy.” The NATO target of spending at least two percent of economic output on defense is also not reflected in the draft budget. The defense budget does not grow, but remains the same for years. Adjusted for inflation, it is therefore falling.
The left, on the other hand, criticized a new arms race. In the budget debate, the Greens emphasized that strong controlling is needed so that the funds do not trickle away. The AfD complained that the war was being used as an excuse for new debts.
Lindner promised the government would do everything it could to avoid stagflation. “Prices would rise, but the economy would not grow.” The government should not rely on the European Central Bank (ECB) to push growth through mini interest rates. According to Lindner, she has already put together a package worth 16 billion euros to relieve the burden on citizens and companies. “More relief will come.” They would have to work quickly and precisely, be time-limited and coordinated at European level. Lindner indicated further help for poorer sections of the population, accompanied by measures for energy efficiency and relief in mobility.
DIHK President Peter Adrian said that short-time work benefits will again be important in the coming months. “In addition, guarantee programs have proven their worth. In energy-intensive areas, which are now particularly badly affected, help with equity will also be necessary.”