Berlin The chancellor and his finance minister were in high spirits. “I wish you, dear Christian, all the best for your work”, Olaf Scholz (SPD) whistled in the direction of Christian Lindner (FDP). “I was happy to be Federal Minister of Finance and I’m sure you will be too.”
The official handover of the two took place on Thursday afternoon in the Matthias Erzberger Hall of the Ministry of Finance. Lindner thanked Scholz warmly for the warm words, but also for leading the coalition negotiations that made the traffic light alliance possible and brought the FDP politician to where he wanted to go: the Federal Ministry of Finance.
What will Lindner do with this office now? This is not only a question of cabinet colleagues who are dependent on budget money, but also of the European partners. How much of the “oomph” that Scholz took care of as finance minister in the corona pandemic will be left with his successor?
The supplementary budget for the current year is the first task that Lindner has to master. The most experienced expert he could find will help him: Werner Gatzer has been State Secretary for the Budget for 16 years, he served ministers of the CDU and the SPD, most recently Scholz.
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Now he is allowed to continue under an FDP head of department. Many in the house had expected that, Lindner officially announced it at the handover.
The finance ministry is to become a “enabling ministry”, as Lindner calls it. He wants to raise the money for the traffic light’s major investment projects, be it in digitization or climate protection. At the same time, they want to “respect” the debt brake, use tax money “sparingly” and insist on “fiscal stability” in Germany and Europe. It sounds a bit like the financial policy squaring of a circle that Lindner announced to his employees.
The new scope
The coalition agreement already shows a certain range. The SPD, Greens and FDP agreed to comply with the debt brake again from 2023. At the same time, the traffic light has opened up a number of ways in which you can get around the debt brake and get more money.
With the debts that will not be needed this year, a reserve for climate spending of at least 55 billion euros is to be built up. And the traffic light could spend up to ten billion euros more per year if it changes the economic component in the debt brake in such a way that it leaves a little more leeway.
Around 25 billion euros could flow into state-owned companies such as Deutsche Bahn as a capital injection or equity. The advantage: This does not restrict the leeway under the debt brake.
Lisa Paus, Vice-President of the Greens parliamentary group responsible for finances, defends herself against the accusation that the traffic light in the coalition agreement has resorted to budget tricks. “It’s pretty transparent what we did there,” says Paus. Because everything else now depends on the actual design – that is, on Lindner.
According to Paus, the truck toll could also bring additional income, the Green politician estimates the possible additional income at around four billion euros. By reducing environmentally harmful subsidies, the federal government could also save five billion euros.
At the same time, the Greens insist that the super write-offs planned for the economy are not too generous and thus too expensive for the tax authorities. Paus estimates the costs at two to three billion euros.
“Overall, German financial policy is on a halfway expansionary course,” says Düsseldorf economist Jens Südekum. “By exhausting all the instruments that are described in the coalition agreement, you can mobilize a lot of money and stay on the expansive course. The big question will be whether Lindner uses the instruments. “
The FDP has a number of reservations about outsmarting the debt brake too much. The liberals are neither prepared to overhaul the cyclical components of the debt brake nor to draw on the full potential of the climate reserve.
“We expect more of the same in financial policy,” says Berenberg economist Holger Schmieding. “Germany is not heading towards austerity measures or a fiscal revolution.” Schmieding already considers it a myth that Germany has pursued an economical financial policy in recent years.
For almost ten years now, government consumer spending in Germany has risen faster than anywhere else in Europe. At the same time, the share of public investments in the gross domestic product has risen again since 2015.
“In the past five years, money has not been the biggest obstacle to German public investment spending,” says Schmieding. Instead, lengthy planning, approval and judicial review procedures slowed down.
There are other voices too. The economist Südekum considers immense investments to be necessary in order to rebuild the economy ecologically. He advises the traffic light to draw on unlimited resources: “For the 2021 supplementary budget, the federal government should build up a decent buffer. If the consequences of Omnikron get really bad, the emergency option of the debt brake can certainly be used again in 2023. “
More relaxed handling of debts
According to a representative study by the Institute for Macroeconomics and Economic Research (IMK), Germans have become more relaxed when it comes to debt. Accordingly, the attitude of the population to public debt has changed in the past few months.
The headquarters of the Federal Ministry of Finance is the Detlev-Rohwedder-Haus in Berlin.
(Photo: BMF / Hendel)
The IMK interviewed around 1,000 people immediately after the general election and then shortly before the coalition agreement was presented. In the first survey, the proportion of those who wanted to implement the reduction of public debt quickly outweighed the majority of respondents (36 percent) that this was not a priority.
Previously, this proportion was less than 30 percent. Especially among the FDP supporters, the proportion of those who see debt reduction as a priority has decreased significantly. The results could be “support for additional investments” for Ampel and Lindner, write IMK economists Jan Behringer and Sebastian Dullien.
European partners and organizations such as the International Monetary Fund (IMF) have also been urging Germany to invest more for a long time. At the same time, they are calling for the EU debt rules to be relaxed. Lindner has always viewed this with skepticism, but in the end signaled a willingness to talk.
And the coalition agreement also opens doors for a reform of the debt rules. On Thursday afternoon, Lindner wanted to call his French colleague Bruno Le Maire. On Monday he will fly to Paris. In an interview with Handelsblatt, Le Maire recently called for the European debt limits to be raised.
Lindner has also brought an experienced expert to his side for the difficult negotiations at EU level: Long-time EU official Carsten Pillath is returning to the Ministry of Finance and becoming State Secretary for European and Financial Market Policy.
And someone else could support Lindner when it comes to warding off excessive debts in Germany, but also in Europe. Solid finances are necessary because the next crisis will come, said Scholz at the handover with Lindner. The only thing unclear is when exactly this will happen, said the Chancellor. “But of course we have to prepare for it.”
More: New cuts by the traffic light ministries: Habeck loses, Wissing wins and Faeser has a problem