Conservative Parties CDU and CSU refuse to accept tax hikes in face of growing budget deficit
German Coalition Parties at Odds Over Austerity Measures
The German federal budget is currently under scrutiny due to a potential budget gap, and the country's ruling coalition parties, CDU/CSU and SPD, are at odds over the best approach to address this issue.
Jens Spahn, Chair of the CDU/CSU Bundestag faction, has sharply criticized SPD Finance Minister Lars Klingbeil for not ruling out tax hikes. Spahn emphasized that tax increases are not part of the coalition agreement and that the CDU/CSU parties are firmly against any tax increases in the context of the German federal budget and potential budget gap.
Alexander Hoffmann, the chairman of the CSU parliamentary group, shares a similar view with Spahn. Hoffmann believes that now is not the time for tax increase debates but for state efficiency debates. The CSU general secretary, Martin Huber, also confirmed the party's stance: there will be no tax increases.
On the other hand, Klingbeil has previously emphasized that all options must remain open regarding the federal budget. However, in a recent statement, Klingbeil stated that everything must be possible regarding tax increases from 2027 onwards. Klingbeil also mentioned that it is important to review all spending for their effectiveness.
The SPD, represented by Finance Minister Klingbeil, has not ruled out the possibility of tax increases. Klingbeil highlighted that all fiscal tools must remain viable from 2027 onward due to significant institutional challenges and is emphasizing economic growth alongside rigorous review of public spending effectiveness as essential to fiscal consolidation.
The CDU/CSU parties, however, are advocating for a review of spending. Spahn stated that the state should review all spending and start saving, as citizens expect this. First steps, such as personnel, administrative expenses, and funding programs, have already been taken, Klingbeil says.
Recent context includes a permanent VAT reduction on restaurant food to 7%, a tax cut initiated by the governing coalition in their 2025 coalition agreement. This VAT cut reduces annual government revenue by about €3.5 billion, which will need to be offset in the federal budget. Thus, there is a tension between existing tax cuts and the fiscal consolidation challenges ahead.
It's worth noting that no indication was found that the parties have changed their positions toward abolishing or simplifying tax returns, although separate calls for simplifying or abolishing tax returns for employees exist from groups like the German Tax Union, not directly tied to these parties’ stance on tax rates.
Spahn made these statements to "Bild" (Friday edition), emphasizing the CDU/CSU's commitment to fiscal responsibility and government efficiency. The main approach to consolidation, according to Klingbeil, is to promote growth. Klingbeil also emphasized the need for a comprehensive package to address high action requirements from 2027.
In summary, CDU/CSU oppose tax increases and prioritize spending efficiency, whereas SPD is more open to considering tax instruments among fiscal policy options for dealing with budgetary pressures. The debate over the German federal budget is expected to continue as the parties navigate the challenges ahead.
The German coalition parties, CDU/CSU and SPD, are at odds over potential tax hikes as a solution to the budget gap, with CDU/CSU parties strongly against any tax increases, advocating for a review of spending instead. In contrast, SPD Finance Minister Lars Klingbeil has left the possibility of tax increases open from 2027 onwards, emphasizing the need to review all spending for effectiveness and economic growth as essential to fiscal consolidation.
