Will it be the week of truth? From Tuesday onwards, the Bundestag will be discussing the 2025 budget, after the federal government was unable to agree on a viable proposal for months. A lot of bad things have been written about the draft – and rightly so. The budget reflects the coalition’s inability to act. For weeks, Chancellor Olaf Scholz has been discussing the figures with Green Economics Minister Robert Habeck and Liberal Finance Minister Christian Lindner. They have not managed to close the gap to the extent that one can speak of serious financial planning.
In the end, it was about three billion euros – with a planned spending framework of almost half a trillion euros. This shows how little the SPD, Greens and FDP can still achieve – even if their leaders negotiate directly under great pressure. The coalition’s deficit is larger than the last figure mentioned. The draft budget contains many “tricks”, as SPD parliamentary group leader Rolf Mützenich described the tricks the government uses to conceal the fact that expected income and targeted expenditure cannot be matched in such a way that the debt rule is adhered to.
Global underspending here, global overspending there. In English, these are accounting items that promise that the government will spend less than it has budgeted, while at the same time hoping to earn more than is expected under current law and foreseeable economic development.
A blatant example of this is the climate fund: the reserves are as good as gone. Foreseeable inflows of 22 billion euros are offset by planned expenditure of 34.5 billion euros. This is offset by a global increase in revenue of three billion euros and a global decrease in expenditure of nine billion euros. In total, as in the core budget, 12 billion euros are missing, which is being concealed globally. Experience shows that some of the funds do not flow out. This may justify a certain “overbooking”. But the coalition is overdoing it with its financial planning. Its actions contradict the budgetary principles of truth and clarity.
Now billions are missing
The coalition has already ignored such principles once. The Federal Constitutional Court thwarted the traffic light policy and plunged it into a deep crisis. It had relied on the credit authorizations that its predecessors had approved by parliament to deal with the Corona crisis, but did not have to use them to the extent feared. Now billions are missing. The traffic light government is still badly hit. It seems at a loss, almost helpless. Recent decisions do little to change that (subsidies for electric company cars, incentives for older people to continue working, zero increase in citizens’ income).
Of course, Russia’s war against Ukraine is having a lasting impact on political affairs. The Bundeswehr must be put back in a position to deter an aggressor. The special fund is a first step, but the turning point announced by Scholz is not fully financed. The financial plan for 2028 includes a significant increase in the defense budget, without it being clear how this is to be achieved. Then there will not only be a global reduction in expenditure called the “bottom line” (eight billion euros), but also one for further action (almost 39 billion euros).
Germany is an anchor of stability in Europe
Despite the changing times, social spending dominates. The SPD and the Greens are opposed to cuts. Pension insurance payments will rise from 116 billion euros to 141 billion euros in 2028. The coalition is exacerbating this development with an expensive pension law. The generational capital pushed through by the FDP does little to change this. At the same time, financial aid is skyrocketing: from a good eight billion euros five years ago to more than 47 billion euros this year. The key words are climate and the environment. Investments are increasing, but not enough. The past is a burden on the future, not least of which is the sharp rise in interest payments.
At the same time, the SPD and the Greens are urging like a mantra that the debt brake be relaxed – although investors are increasingly suspicious of the credit policies of America, France and Italy. Germany is an anchor of stability in Europe. No one who values the monetary union should endanger that. No one knows what will happen if a storm breaks out on the markets.
The economy is not picking up, people are holding on to their money. The red-green-yellow coalition is certainly not blameless when it comes to the paralyzing mood in the country. The traffic light coalition has gambled away its credit. This is likely to be its last budget.
