[1/6]Chancellor Olaf Scholz and other ministers attend the weekly cabinet meeting at the Chancellery in Berlin on December 6, 2023. Portal/Liesa Johannssen acquire license rights
BERLIN, Dec 6 (Portal) – Germany’s coalition partners will step up efforts on Wednesday to find a way to plug a 17 billion euro ($18.3 billion) hole in next year’s budget after They have failed to resolve the crisis overnight, increasing financial uncertainty plans in Europe’s largest economy.
The failure of crucial talks between coalition leaders before Wednesday means Parliament is unlikely to pass a 2024 budget by the end of the year, leaving spending plans on everything from climate projects to social benefits and for local authorities in limbo.
Social Democratic (SPD) Chancellor Olaf Scholz, Green Vice Chancellor Robert Habeck and Finance Minister Christian Lindner of the fiscally conservative Free Democrats (FDP) had hoped to reach an agreement overnight that they would present to the cabinet on Wednesday.
But coalition sources told Portal little progress had been made overnight and the parties were still far apart.
“The budget will not be discussed in the cabinet today,” said Green Party co-leader Ricarda Lang to Bayerischer Rundfunk.
The budget crisis arose last month when the Constitutional Court blocked the redistribution of 60 billion euros of unused pandemic emergency aid to climate projects, throwing the government’s financial planning into disarray.
It’s about the financing of municipalities, companies and countries, and the longer the wrangling lasts, the greater the uncertainty becomes.
DEBT BRAKE RIDDLE
A key question is whether Germany’s self-imposed cap on net new debt should be lifted in 2024, a move Lindner vehemently rejects.
He bowed to pressure to suspend the cap, known as the debt brake, for this year following the Constitutional Court ruling, but on Tuesday reiterated his opposition to doing so for a fifth year in a row, saying it should not become the norm.
In order to suspend the debt brake, the government can declare a state of emergency – for example the corona pandemic or a rise in energy prices due to the Russian invasion of Ukraine – and Parliament must agree.
“You can’t turn an emergency situation into a normal situation,” Lindner told ARD.
The debt brake is anchored in the German constitution and limits the public deficit to 0.35% of gross domestic product.
Lindner is also against tax increases and wants to close the budget gap primarily through spending cuts – a fundamentally different approach than the SPD and the Greens.
The Greens want to stick to investment climate projects and ensure Germany’s transition to a green economy.
Scholz, who will meet with party members at a party conference this weekend, refuses to agree to a cut in spending on social benefits such as unemployment benefits favored by the FDP.
The budget dispute has caused tensions in the already loveless three-party coalition and polls show that the opposition Conservatives and the far-right Alternative for Germany (AfD) are the big winners of the crisis.
If no agreement is reached, the coalition could collapse, but most observers say it is in the interests of all parties to reach an agreement and stay in power.
Lang, from the Greens, said a political decision would be made “very, very soon” and that the coalition would have to work out a compromise to avoid a major government crisis.
As long as the sides continue to talk, a tentative budget for next year could take effect until an agreement is reached. This regularly happens after federal elections but before a budget has been agreed.
($1 = 0.9267 euros)
Writing by Madeline Chambers, Editing by Rachel More and Toby Chopra
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