The Traffic Light Budget Crisis - Will Greece or Coal Germany Survive?
After the disastrous Traffic Light budget, the question lingers: should we anticipate a delightful soiree or a tear-filled evening? The evening before, the city's cinema screens the thriller: SECRET BUDGET!
Following the fiasco of the Traffic Light administration before the Federal Constitutional Court, the question is: can the government secure a budget for the following year before the year's end?
A Hail Mary Play this Night?
The Three from the Gas Station
Officially, nothing has been decided. No one wants to discuss the matter either. However, here's what's certain:
► Economics Minister Robert Habeck (54, Greens) had to cancel his assignment to the World Climate Conference and the Gulf (until Friday) due to the urgent crisis.
► FDP leader and Finance Minister Christian Lindner (44) has called off his party's Christmas soiree planned for this evening at the Genscher House.
► Chancellor Olaf Scholz (65, SPD) has an open schedule this evening: King Philippe (63) of Belgium will be attending a reception at 5 pm. After that, the Chancellor is free.
Government spokesman Steffen Hebestreit (51) sounded quite hopeful by his standards during a press conference on Wednesday: we will find a solution 'very soon'. Translated to informal German, that means 'perhaps tomorrow, Thursday, December 7'!
The Goal: 30 Billion Euros
Roughly 17 billion of this sum needs to be discovered within the so-called core budget for the Federal Republic in 2024 - which is essentially the standard budget. Additionally, 13 billion is required to replace funds from the KTF, an initiative that was challenged by the Constitutional Court.
The Great Crested Grebe Campaign
Until the budget is approved, a sort of 'grebe campaign' is underway: the chief negotiators are going underground, leaving other ministers in the dark.
Power Struggle: Capital's Snow
The three leaders in the Battle of the Budget are locked in a high-stakes game. Only their three trusted confidants can join them:
► Wolfgang Schmidt (53, SPD), head of the Chancellery and Scholz's long-term companion
► Anja Hajduk (60, Greens), Habeck's State Secretary in the Ministry of Economic Affairs
► Steffen Saebisch (53, FDP), Linde's State Secretary in the Ministry of Finance
The Ukraine Arc
One idea gaining traction is: the debt brake, which the FDP held as sacred, could be suspended once again for the billions Germany will spend on Ukraine in 2024. This would cover 8 billion for military aid alone, as well as humanitarian aid and financial aid for Ukrainians who have sought refuge in Germany. This sums up to approximately 20 billion euros, which could be covered with additional loans and no longer require saving.
The Chancellor's Timeline
The Chancellor has a desired deadline: A special session in parliament on the budget in the week prior to Christmas. A second special session of the Bundesrat would follow. By New Year's Eve, the budget for 2024 should be finalized.
Under Pressure
The Chancellor is under pressure: he has his SPD party conference coming up on Friday. On Saturday, he will address his comrades. By then, he would like to have celebrated the budget mass and achieved consensus with Lindner and Habeck.
If no agreement is reached by then, an emergency time slot has been reserved for Sunday, as per traffic light coalition circles.
The Only Questions Remaining
Who will lose the most feathers by this December morning - which coalition member will become the 'plucked' traffic light chicken?
Sources:
Enrichment Data: The current status of the budget negotiations between the SPD, Green Party, and FDP in Germany is one of failure. The previous coalition government, consisting of these three parties, collapsed at the beginning of November 2024 due to irreconcilable differences over the budget, particularly regarding the "debt brake" mechanism. The FDP insisted on compliance with the debt brake, which caps the structural budget deficit at 0.35% of GDP, while Chancellor Olaf Scholz (SPD) considered higher public debt necessary to fund areas like defense and infrastructure spending[1].
Several key issues contributed to the collapse:
- Debt Brake: The FDP opposed any deviation from the debt brake, while the SPD and Greens advocated for a relaxation of the debt brake to allow for increased spending on defense, infrastructure, education, and environmental protection[1].
- Budget Controversies: The 2025 budget was a major point of contention. Chancellor Scholz wanted to temporarily derogate from the debt brake mechanism, which the FDP opposed[4].
Given the collapse of the previous coalition, potential solutions to secure 30 billion euros for the 2024 federal budget are being considered in the context of new coalition negotiations:
- Debt Brake Relaxation: The SPD and Greens advocate for a relaxation of the debt brake, potentially allowing for a higher structural deficit. This could be achieved by creating a new "special fund" not subject to the debt regulation, which would increase funds for spending on defense, infrastructure, education, and environmental protection[1].
- Compromise on Fiscal Policy: A compromise on the debt brake might be necessary. The Bundesbank has proposed raising the structural deficit to up to 1% of GDP, depending on the overall debt/GDP ratio, which could provide more fiscal leeway[1].
- New Coalition Formation: The next government will likely involve the CDU/CSU, which is likely to form a coalition with either the SPD or the Greens. The FDP might also be involved, but it would need to be part of a broader coalition to achieve a majority in parliament[1].
These negotiations will be crucial in determining how Germany will allocate its budget and address its economic and fiscal challenges.
