France and Germany in danger of being destroyed by a Budget Crisis

Jakarta –

Chancellor Olaf Scholz and French Prime Minister Michel Barnier had similar problems. Both heads of government had to manage without a budget. Without the support of a majority of groups in parliament, the government’s spending plans were not adopted in both countries.

The state budget is basically a government program in the form of numbers. But in the midst of the Ukraine War and Donald Trump’s victory in the US, the two richest countries in the European Union seemed to have run out of fuel.

PM Barnier can still expect a regular budget in 2025, despite losing the election. But this no longer applies to the minority government that is still in power in Berlin. At best, an additional budget for 2024 could be decided with the support of the opposition before the German Bundestag parliament is dissolved.

This is crucial because the Scholz government is short of money this year, especially to finance an additional expenditure of 3.7 billion euros in social assistance funds, and more than 10 billion euros in stimulus funds to promote renewable energy. The government must find new sources of income before the end of this year or be forced to freeze the budget.

Berlin and Paris: weak in Brussels and Washington

When Donald Trump is inaugurated in the White House for the second time on January 20, it is likely that the Bundestag will be dissolved. Nearly five weeks later, on February 23, Germany plans to elect a new parliament. Depending on the election results, the formation of the government could be delayed until the spring.

The German Constitution guarantees the continuity of the government after the dissolution of the Parliament. This means that the chancellor and the ministers will continue to serve, even if only to carry out the basic functions of the government, without a mandate to make major decisions.

The new German government must negotiate with Donald Trump or build a consensus in the European Union. Until now, the coalition government of the Social Democratic Party, SPD, Liberal Democratic Party, FDP and the Green Party is known as a difficult partner, because they often have conflicting ideologies in the cabinet. Disputes within the coalition in Berlin affected the EU, as it often abstained from voting because they did not agree to stand, such as two votes on the EU Supply Chain Law and emissions regulations for trucks.

Dramatic debt in France

In France, the coalition created by Prime Minister Michel Barnier from the conservative Les Republicains party and President Emmanuel Macron does not have the support of a majority in the National Assembly.

Not only that, it is reported that the coalition parties are busy fighting, and that they are still unable to agree on a government program, even though they have been in office for two months.

Ironically, the rejection of the 2025 draft budget in the National Assembly could help the Prime Minister. Because this means that the text that will be proposed to the second house of parliament is not an amended budget version, but the government’s original version.

This is because cuts to social benefits and public administration, which promise total savings of 60 billion euros for 2025, are likely to be easier to implement in the conservative-controlled Senate than in the National Assembly.

The savings are absolute, as France has a high debt burden. In June, the EU Commission began proceedings against France, and financial rating agencies also began monitoring France. With a deficit of six percent of GDP this year and a debt accumulation of 113 percent of GDP, the fiscal situation in Paris is extraordinary.

A vote of confidence is followed by a vote of no confidence

Shortly after Chancellor Olaf Scholz called for a vote of confidence in the Bundestag on December 16, the fate of his French colleague will also be decided. According to the current timetable, the French budget 2025 is expected to be submitted to the reconciliation committees of both chambers of parliament in the last week before Christmas. The National Assembly must then make a final decision.

It is very likely that the French government will use a special clause to pass the budget without a final vote. If the government relies on Article 49.3, the opposition has 24 hours to submit a motion of no confidence. If he gets a majority, the government will have to resign and the proposed budget will fail.

Farewell at the end of the road?

If this situation were to happen, the two largest economies in the European Union would be politically paralyzed, amid the escalation of the war in Ukraine and the pro-European administration of Donald Trump.

In both countries, budget management is limited to legally established and existing obligations, and is only intended to guarantee the basic functions of the state. Salaries, pensions and social benefits will still be funded, but political projects will be delayed.

Chancellor Olaf Scholz and his French counterpart Michel Barnier will meet at the Chancellery in Berlin next week. No one knows whether the first meeting in Germany will be the beginning of a meeting or even a separation.

Adapted from German DW article

(Summer/Summer)