Berlin Christian Lindner presented a budget in the Bundestag on Tuesday that he knows will soon be outdated. “These are times of uncertainty,” said the Federal Minister of Finance and leader of the FDP. The effects of the Ukraine war will also be reflected in the budget, which is why Lindner has already announced a supplementary budget.
This additional budget is intended to finance, among other things, the costs of caring for the refugees, further aid for Ukraine and a new relief package for citizens and companies suffering from high energy prices.
CSU regional group chief Alexander Dobrindt criticized the finance minister because of the unclear financial situation. “This is not a budget to be advised,” he said, rather it is a “household puzzle to be guessed”. The Union complained that Lindner and the traffic light coalition were planning a record deficit and the gradual abolition of the debt brake.
Lindner defended his budget with clear words against the accusations from the Union – and between the lines also against covetousness and criticism from his own coalition. He pointed out that the research institutes were lowering their growth forecasts for Germany, while inflation was rising at the same time. “A development towards stagflation would be a danger,” said Lindner. Citizens can rest assured that the federal government will use its fiscal policy options to avoid such a scenario.
The coalition is planning to use the emergency clause of the debt brake again this year. The budget that has now been introduced provides for net borrowing of almost 100 billion euros. Added to this is the supplementary budget, the volume of which is still unclear. At the same time, a special fund of 100 billion euros is to be created for upgrading the Bundeswehr.
The next relief package leads to dispute
In total, Lindner will incur debts of well over 200 billion euros – and thus probably exceed the previous record debt of 215 billion euros from last year. The Union expects net borrowing of up to 250 billion euros this year.
In times of crisis, the state must react, Lindner defended the high liabilities. The Minister of Finance announced another relief package after the traffic light had recently decided on measures amounting to 16 billion euros: “We as a coalition agree: More relief will come.”
Lindner promises further relief
Among other things, Lindner pleaded for more help for recipients of basic security, but also for relief for the “broad middle”, which suffers from the high fuel prices. The head of the FDP had proposed a fuel discount, but this was met with resistance from the SPD and the Greens. In the end, there will be “a combination of different instruments,” says Lindner. In his words, it is important that these “act quickly”, “accurate” and “time-limited” and are “coordinated in the EU”.
The traffic light coalition is not only discussing the components of the relief package. The debt brake, which Lindner wants to comply with again from 2023, is less important to the SPD and the Greens. And the Greens and left-wing Social Democrats have already signaled their willingness to raise taxes in order to be able to finance the burden of the Ukraine war.
Lindner shows his red line
In his budget speech, the Minister of Finance gave a clear rejection of such considerations as a precaution. He emphasized the “renunciation of additional tax burdens” and the “commitment to the debt brake” as the “guard rails” of his financial policy.
Everything must be avoided that would put an additional burden on citizens and companies, said the Minister of Finance. That applies to tax increases as well as to new bureaucratic projects. “A moratorium on stress” is needed for the economy.
Presumably also with a view to the voices in the SPD and Greens, who are open to tax increases for higher earners and the wealthy, Lindner emphasized: “With the waiver of tax increases, an important red line was marked in the coalition agreement.” In other words: with him as finance minister nothing to do there.
>> Read here: Will stagflation shape the next few years?
At the same time, Lindner held out the prospect of a “return to normality” in budgetary policy. From 2023, the debt brake is to be complied with again. This is important in order to build up “reserves” for future crises.
The Union warns of the end of the debt brake
The opposition, on the other hand, already sees “the end of the debt brake” coming up with the supplementary budget and the special fund, as the budget expert of the Union faction, Christian Haase (CDU), said. And Dobrindt emphasized that the special assets for the Bundeswehr are “special debts”.
The traffic light is dependent on the votes of the Union when setting up the special fund, which is to be secured by the Basic Law. That makes things tricky for Lindner. On Tuesday evening he wanted to negotiate with Dobrindt about the construction. The Union wants to stipulate that the 100 billion will only be used for defense spending.
In the traffic light coalition, on the other hand, there is a demand to strengthen other areas such as civil protection or development policy. The Greens budget politician Jamila Schäfer therefore sees a need to catch up on Lindner’s draft budget. “In particular, the Federal Office for Civil Protection and Disaster Assistance (BBK) and the protection of critical infrastructure such as energy and water supply must now be significantly increased and thus made capable of acting,” she demanded.
The Federal Foreign Office also needs sufficient funds, because “right now is the time for an effective foreign policy,” says Schäfer. “Diplomacy is the basis for our international action and thus for an effective security policy – the budget must reflect that.”
Nobody in the federal government expects the special fund for defense to fail. In the end, the Union will have to agree, everything else would be difficult to explain. And the critics in the coalition will also support it.
However, consent usually comes at a price. Lindner probably suspects that too, which is why he may have emphasized his financial policy guidelines of debt reduction and the waiver of tax increases so much.
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