Germany’s three governing parties are locked in a bitter row over the 2025 budget, with experts warning that the deadlock could be the last straw for the uneasy coalition.
Chancellor Olaf Solz’s Social Democrats (SPD), the Greens and the liberal FDP, which came to power in 2021, have until July 3, the end of the current parliamentary term, to reach a compromise.
FDP Finance Minister Christian Lindner, a fiscal hawk, is demanding nearly 30 billion euros ($32 billion) in savings — which the Greens and SPD have been clamoring for.
The coalition has faced many controversies in the past, but some experts believe this could be what finally breaks up the government.
“These talks will determine the coalition’s continued presence in power,” the Sueddeutsche Zeitung newspaper reported this week.
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While budget discussions have been difficult in the past, they have never lasted this long.
“It is much more difficult than usual,” Jacques-Pierre Gougon, an expert on German politics at the French Institute for International and Strategic Affairs, told AFP.
He pointed to a gloomy picture given Germany’s poor performance of late, with Europe’s biggest economy hit hard by high inflation and a slowdown in manufacturing.
Tax woes
According to the Ministry of Finance, tax revenues for 2025 are expected to be 11 billion euros lower than originally predicted.
A ruling by the country’s highest court in November that the coalition had breached the constitutionally enshrined “debt brake”, a self-imposed ceiling on annual borrowing, also limited the scope for new spending.
In addition, all three parties are increasingly concerned about their own support levels after doing poorly in this month’s EU elections — in which the conservative CDU-CSU opposition bloc came first and the far-right AfD second.
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A key sticking point in the debates centers on unemployment benefits.
Lindner wants to cap the current payments, which he believes are too expensive and don’t provide enough of an incentive to get people back to work.
But the SPD will not accept this. Improving benefits has been central to the party’s 2021 election campaign as they seek to win back the support of lower-income voters.
“Politically, the Social Democrats cannot afford to give it up,” Gougeon said.
There is also disagreement over any measures affecting diplomacy and defence, as Germany seeks to defend liberal, European values and overhaul its creaking military in the wake of Russia’s invasion of Ukraine.
Defense Minister Boris Pistorius is asking for an increase in his ministry’s budget and for military spending not to be covered by the debt brake.
Debt dispute
“It would be disastrous to have to say in a few years: we saved the debt brake at the expense of Ukraine and the European security order,” said Foreign Minister Annalena Baerbock, of the Greens.
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While calls to loosen debt rules have grown, Lindner and the FDP have flatly refused to back any changes.
Keeping the brakes on is an “existential question” for the party, according to Gougeon.
But Lindner vowed Wednesday not to push for defense savings.
Scholz, Lindner and Economy Minister Robert Habeck, of the Greens, are due to meet on Sunday in an attempt to make progress.
The aim is to prevent “the budget crisis from turning into a crisis of confidence”, which could lead to new elections, according to the left-wing TAZ newspaper.
The parties may eventually compromise as the alternative — a government collapse — will not be in their favor.
“They know they would be sidelined if there were new elections and they will want to avoid them,” Gougeon said.
Source: AFP