German government at loggerheads over budget

After weeks of wrangling and despite poor poll ratings and much disagreement on substantive issues, the top representatives of the three-way coalition — the center-left Social Democrats (SPD), the environmentalist Greens and the neoliberal Free Democrats (FDP) — managed to agree on a draft for the 2025 budget at the beginning of July.

Chancellor Olaf Scholz (SPD) then went on vacation, but back home in Germany, the budget quickly became a hotly disputed topic again.

Last week, Finance Minister Christian Lindner (FDP) announced that some points in the deal would have to be renegotiated. Experts in his ministry concluded that they may be unconstitutional. According to Lindner, this would cost €5 billion ($5.46 billion) to the draft budget.

Fearing the Federal Constitutional Court

The economic and legal experts found fault with the plan to reallocate money from a fund set up in 2022 to mitigate the impact of the Russian war of aggression against Ukraine on the price of natural gas in Germany. Of that fund, known as the gas price brake, €4.9 billion have not been spent, so the idea was to reallocate that amount and use it to boost the overall budget. 

But such a maneuver brings back bad memories, as a similar maneuver, albeit on a much larger scale, put the government in dire straits once before. In November 2023, the Federal Constitutional Court ruled that the government was not allowed to reallocate around €60 billion from a fund set up to mitigate the fallout of the COVID-19 pandemic and instead use it to subsidize the transition to a green economy. This tactical move was attributed to Scholz himself, who was the finance minister in the previous government under former Chancellor Angela Merkel.

Since this historic court ruling, the government has continually been scrambling to fill holes in its budget.

"This won't happen to me a second time," Lindner said in a TV interview on Sunday, using the opportunity to present himself as the government's iron-fisted savings commissioner.

He reiterated his resolve to uphold the "debt brake" enshrined in the Basic Law, the German constitution, which states that the German state must make ends meet with the money it takes in. 

Only in exceptional circumstances can the "debt brake" be lifted and the government take on new loans. Due to the COVID-19 pandemic and Russia's invasion of Ukraine, parliament suspended the "debt brake" several times, allowing the government to borrow fresh billions, for which interest rates have risen dramatically.

However, representatives of the SPD and the Greens have long called for the "debt brake" to be "modernized" in view of the challenging times. 

A matter of communication style

Lindner's remarks have triggered a backlash from SPD representatives. They were particularly upset that Lindner publicly spoke about the problems with the draft budget instead of first talking to his government partners.

The SPD's General Secretary, Kevin Kühnert, spoke of "a kind of self-promotion" on the part of the Finance Minister to go public while the Chancellor was on vacation. 

However, Lindner has received support from Veronika Grimm, professor of economics at the University of Nuremberg. She is one of the five members of a committee established in 1963 to advise the government.

"Especially in the current situation, the government should definitely avoid drawing up a vulnerable budget," Grimm told the Funke Media group, arguing it should not become a habit for the government to ignore the law. "If the budget could be challenged again in the Federal Constitutional Court, this would further increase uncertainty."

No reason to panic?

The government representatives who are holding out in Berlin during the summer recess have been trying to calm the waters. At the weekly government press conference, the deputy spokesman for the Chancellor, Wolfgang Büchner, was asked what he had to say about the fact that the governing parties were once again fighting. 

"The reporting about clashes is usually louder than the actual clashes," he said. "Things will be settled. The government will continue to do a good job and face up to the voters at the end. And then they will have to judge."

The next general election will occur in just over a year, probably on September 28, 2025. Considering their poor showing in opinion polls, it is difficult to imagine how the divided coalition could manage to be reelected.

This article was originally written in German.

While you're here: Every Tuesday, DW editors round up what is happening in German politics and society. You can sign up here for the weekly email newsletter Berlin Briefing.