In the fight against horrendous energy prices and other consequences of Russia’s war against Ukraine, the federal government wants to borrow billions again in the next year. However, after three years of a state of emergency, the debt brake is making a comeback. This was one of the most important campaign promises made by FDP leader Christian Lindner. The finance minister owes the fact that he manages to keep it primarily to the poor economy and the creativity of his budget experts.
The federal budget for 2023 will be decided on Friday by the Bundestag. Until then, MPs will spend three days debating departmental budget after departmental budget. There will probably be no more surprises: after all, the budget holders just agreed on the final reallocations in an 18-hour committee meeting.
For the opposition, Lindner has already lost a lot of credit as finance minister with his first budget for which he was fully responsible, in other words, he has lost credibility. Because in addition to the normal budget, there are huge special pots for major investments. In truth, not much is left of the promise of a debt brake, criticize the Union and AfD in particular. Lindner always boasts that he has rejected many of the wishes of his ministerial colleagues, but has shown no real willingness to bail out.
Key figures from the debt brake budget for 2023:
Volume:
Overall, the federal budget has a planned volume of 476.29 billion euros. That’s about 20 billion less than this year, but in addition to aid packages due to the war in Ukraine, there has also been increased spending to deal with the coronavirus pandemic. As usual, the Ministry of Labor has the largest single budget, mainly due to the high amounts for pension insurance. At number two is the Department of Defense.
Payables:
After three exceptional years, first due to the pandemic and then due to the war, the debt brake under the Basic Law is expected to come back into effect. But that doesn’t mean the federal government can’t take out new loans — and that’s Lindner’s luck. Due to the bad economy, debts of around 45.6 billion euros are allowed. The traffic light coalition makes full use of this scope.
Dealing with the Aftermath of War:
Big items in the new budget have to do with the war in Ukraine. MEPs just approved more funds for humanitarian aid, reconstruction and the fight against hunger. There are also, for example, a reform of the billion-dollar housing subsidy, a subsidy for heating costs for the needy and the 49 euro ticket for local transport.
Extra help for families:
Households are often particularly hard hit by high inflation, so they too should receive further relief. Thus, the family allowance increases to a uniform 250 euros per month and child. This means a plus of 31 euros for the first and second child and a plus of 25 euros per month for the third child.
Tax relief:
The state forgoes tax revenues of 18.6 billion euros, offsetting the consequences of inflation on income taxes. In return, it increases the basic allowance, i.e. the income up to which no tax has to be paid. Other benchmarks in the tax rate will also be adjusted. The result: 48 million citizens will have to pay less taxes next year. This is to compensate for the fact that they also have lower purchasing power due to high inflation.
Where else does the money come from:
Not all projects are paid for from the regular budget. The investments in the Bundeswehr, but above all the planned price brakes for gas and electricity, are debt-financed by huge special pots. The brakes on energy prices alone are expected to cost more than 80 billion euros next year. In addition, 15.2 billion are earmarked for the state’s stake in crisis-hit gas importer Uniper. Lindner finds these secondary budgets fine, because they cover crisis-related expenditures that should be separate from the regular federal budget.
Risk of rising interest rates:
The Confederation has to pay significantly more interest on its debt than in previous years. This makes the hosts nervous. They have already foreseen another 10.3 billion euros for interest payments. But nobody knows if it will be enough and if the Lindner debt brake will really be sustainable.
