The discord within the German traffic light coalition over the budget persists, especially with regards to the debt brake and fiscal policy. The Green Party and the Social Democrats (SPD) advocate for suspending the debt brake, while the Free Democratic Party (FDP) opposes this. The coalition leaders, Chancellor Olaf Scholz, Finance Minister Christian Lindner, and Economics Minister Robert Habeck, have yet to reach a consensus on the €20 billion shortfall.
Recently, Finance Minister Lindner revealed that the media had misrepresented the budget situation. Approximately €6 billion of the deficit was due to increased citizen's income expenditures, and €3 billion was attributed to reduced electricity tax costs.
The FDP is pushing for an abandonment of the planned inflation-linked rise in the citizen's income, as the actual inflation rate was lower than projected. This proposition faces resistance from the SPD, as the citizen's income became a prestige project for them and a departure from Hartz IV, a contentious labor reform initiative.
The CDU/CSU and some within the FDP are advocating for a reduction or total elimination of basic child benefit, which the Greens view as integral for protecting their stance on social issues.
Suspending the debt brake is a preferred solution among sections of the SPD and Greens, but the FDP raises constitutional concerns. Given the ongoing war in Ukraine and energy crisis, justifying another suspension may prove challenging, especially if the Federal Constitutional Court intervenes.
Concessions on pet projects could potentially harm all three coalition parties, as they may be perceived as caving during election campaigns. On the other hand, unpopular proposals, like scrapping pension benefits and aid to Ukraine, could damage their public image.
Exploring energy subsidy reductions may be an option for bridging the budget gap. The Federal Environment Agency estimates €65 billion in climate-damaging subsidies, which could provide potential flexibility for budgetary adjustments. However, cutting these subsidies might be perceived as a betrayal of green policies by the SPD and Greens.
The traffic light coalition leaders are under pressure to reach a consensus before the Christmas break to avoid a public relations blunder. Demonstrating results and unity will be crucial for their future and maintaining public support. Lindner plans to submit proposals to the Bundestag soon, initiating a heated debate.
Additional insights suggest that the current budget tussle revolves around fiscal policy and the debt brake, with the SPD and Greens seeking to implement policies against the debt brake's restrictions, while the FDP supports fiscal discipline and debt reduction. Achieving a balance between green perspectives and financial discipline might help resolve their budget disagreements.
The longer the coalition parties delay in coming to a resolution, the more their public image suffers. The time is ripe for them to deliver and demonstrate unity, setting the stage for a more harmonious future within the coalition.
