Berlin The Federal Court of Auditors admonishes the federal government because of the sharp increase in debt. “In order to prevent an impending loss of control over federal finances, the federal government must stop the dynamic of new borrowing,” says a new report by the auditors on the planned new federal budget.
The severe crises of the past three years have left deep scars on federal finances. In order to cope with them, the federal government has to absorb almost 850 billion euros new debt planned. The mountain of debt would thus increase by 60 percent to more than 2.1 trillion euros within just three years.
“Never before have so many new loans been approved in such a short time,” said Kay Scheller, President of the Federal Audit Office. According to the report, this dynamic threatens to “seriously jeopardize” the state’s ability to act. The interests of the young generation in particular are overridden by constantly evading new debts.
“For stable federal finances what is needed now are clearer, smarter and also painful decisions,” Scheller continued. Specifically, the Federal Court of Auditors is calling on the federal government to reduce the burden on future generations by repaying crisis loans more quickly.
In addition, “the gutting of the federal budget by fleeing into special funds must be reversed”. In the federal-state financial relations, the federal government needs to be relieved and reporting on the “explosively increasing interest expenditure” is needed.
As an independent body, the Federal Court of Auditors monitors whether the federal government handles taxpayers’ money with care. But that’s not the only reason why his words carry weight. The federal government is currently preparing the federal budget for the coming year. This week, Federal Finance Minister Christian Lindner (FDP) is holding talks in person with all cabinet members about their budgets for 2024.
Lindner speaks to all ministers personally
It is rather unusual for the finance minister to conduct all the talks himself. The reason for this is a tangible budget row, which Lindner is dealing with, in particular, with Economics Minister Robert Habeck and the Greens. Lindner and Habeck had reproached each other in a heated exchange of letters.
Habeck accused Lindner of blocking agreed traffic light projects such as basic child security. Lindner replied that Habeck was breaking the coalition agreement if he demanded tax increases or exceeding the debt limit anchored in the debt brake in order to finance the traffic light plans.
The report of the Federal Court of Auditors, with which the auditors clearly side with Lindner, now comes into precisely this dispute. For example, the auditors are calling for the “turning point announced” by Lindner for budgetary policy to be implemented.
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“Politicians are asked to budget well, i.e. to prioritize,” said Scheller. The government and parliament have a responsibility to weigh up conflicts and make decisions, “instead of taking the easy route and shifting these decisions about debt into the future”.
Too many expenses are tied up
The problem from the point of view of the Court of Auditors: More and more expenditure in the federal budget is tied up, especially for social spending. In addition, there is the mandatory repayment of debts taken out in the corona and energy crisis from 2028 and sharply rising interest costs for new debts, which have exploded from four to 40 billion euros within three years.
“The interest burden as the price of the debt robs the federal government of the last remaining budgetary leeway,” write the auditors.
The Finance Minister is currently negotiating with the ministries about their budgets for 2024.
(Photo: dpa)
Evidence of this are always new special funds outside of the regular budget. “By shifting debts to special funds, the federal budget will be gutted and the debt rule will be eroded,” state the auditors.
The President of the Federal Court of Auditors criticizes the budget policy of the federal government.
(Photo: imago/IPON)
There is also an ever-widening “debt gap” between the federal government on the one hand and the states and municipalities on the other. While the federal government incurred record debts, the federal states and local authorities achieved strong surpluses in the previous year. “As a result, the federal government uses its new debt to finance the consolidation of the state budgets,” writes the Court of Auditors.
The funding basis of the federal budget is eroding as a result of the permanent waiver of tax shares in favor of states and communities anyway. “The federal government has reached its breaking point,” said Scheller.
The federal government must urgently resolve the “fossilization” of the federal budget, make all branches of social security viable for the coming decades and must not decide on any new spending without long-term financing.
Economists consider debt levels to be unproblematic
Many politicians from the SPD and Greens, but also many economists, do not see the debt situation as dramatically as the Court of Auditors, quite the opposite. They refer to Germany’s relatively low level of debt. In spite of the strong increase in debt, the debt is 70 percent of the gross domestic product and, according to forecasts, will fall in the next few years. That’s why there are voices, especially in the left-wing political camp, that are calling for more debt – and want to reform the debt brake.
First of all, the coalition wants to comply with the debt rule. Chancellor Olaf Scholz, Lindner and Habeck agreed on this during a confidential conversation last week. But that also means that the coalition will have to prioritize spending.
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