Finance minister puts Germany back on austerity course

by Kjeld Neubert

German Finance Minister Christian Lindner will stay true to his goal of reimposing Germany’s debt brake for the first time since 2019 in the budget that is to be approved by the Federal Cabinet (Bundeskabinett) on Wednesday.

While the government has been struggling to agree on the upcoming federal budget since the start of the year, Lindner introduced strict austerity targets for the individual ministries to close the existing financial gap of €20 billion. With the new budget, this target is about to be met.

Following the pandemic and the energy crisis, it is now necessary to return to fiscal “normality,” according to the draft already viewed by news agencies.

The budget for the coming year is now down to €445.7 billion from €476.2 billion in 2023. While Germany will still make new debt of €16.6 billion, it is far less than this year, where the federal budget came with swapping €45.6 billion of additional debt. The ministry stated that a deficit of about €20 billion has been closed in the draft, without having to speak of a “slashing process.”

According to government representatives, the budget will prioritise spending on defence, education, digitisation and climate protection.

Under the new draft, all ministries, except the Defence Ministry, will have to cut back on expenditure- a move youth organisations and others have already criticised.

In an open letter to Lindner, Economy Minister Robert Habeck, and Chancellor Olaf Scholz, 10 youth organisations representing around one million people expressed concern about the planned federal budget.

This budget would “not even begin to meet the social challenges of today and tomorrow” and, when it comes to climate goals, would lack over €160 billion to achieve those set for 2030, the groups, including climate activists of Fridays for Future, wrote.

The youth organisations disagree with the statement that “the debt brake is in the interest of young people” and criticise the resulting limitation of the state’s room for manoeuvre.

Linder already indicated a further need to cut €14.4 billion in the years 2025 to 2027, where there is still a need for consolidation.

On the weekend, he commented on the future financial planning in an interview with the Handelsblatt:

“If you want to finance something new, you have to say where the money will come from. In other words, what is no longer to be financed,” he said.

*first published in: Euractiv.com