German government descends into crisis mode – DW – 11/04/2024

To give up or to save what can be saved? This is an election facing the centre-left government of the Social Democrats (SPD), the Greens and the neoliberal Free Democrats (FDP), which has been in power for almost three years. The three parties have been controversial because many of their core policies are very different: the SPD and the Greens believe in strong state and debt policies. The FDP takes a different view.

The first thing we agreed on ended quickly. The give and take that is necessary for a coalition is now becoming more and more difficult.

The situation has recently increased in terms of economic policy and budget. A decision by the Federal Constitutional Court almost a year ago exposed the conflict between the coalition partners. At the time, Germany’s highest court ruled against the government’s plans to distribute money bought but not used from a debt fund taken out to mitigate the economic fallout from the COVID-19 pandemic. . This money was earmarked for the government’s climate action budget. The court’s decision left the budget €60 billion ($65 billion) short.

Since then, the three partners in the partnership have been trying to raise their profile at the expense of others, announcing proposals that had not been discussed with their partners.

Now, The German economy is stable and tax revenue has decreased, which will punch another hole in the country’s coffers.

Last month, Chancellor Olaf Scholz (SPD) held an industrial meeting with leading businessmen and members of industrial unions but did not invite his Deputy, the Minister of Economy of the Green Party Robert Habeck or Finance Minister Christian Lindner, who is also the chairman of the business. -facing the FDP.

Linder then arranged a meeting with other business representatives, Habeck responded by offering a billion euro, debt-backed fund to encourage corporate investment.

The FDP wants a change of direction

Habeck’s proposal is at odds with the FDP’s position, which insists on the so-called credit limit – Germany’s strict anti-corruption laws that limit new debt to 1% of GDP per year, a provision enshrined in the constitution .

However, it is clear that the veto was not enough for Lindner. In an 18-page policy paper, he called for a change in economic direction. The paper reads like a strategic election campaign program for the FDP, which has fared poorly in opinion polls and recent regional elections.

Lindner calls for far-reaching tax relief for companies and high-income earners. He wants to scrap tough climate protection measures and cut welfare

These positions are unacceptable to the SPD and the Greens and are against the coalition agreement. This is why Lindner’s allies in government are talking about the challenge and are wondering if Lindner’s intention is to be kicked out of the coalition in the hope that this process will give him enough credit with conservative voters to boost the FDP to more than five percent of representation in parliament. .

The federal government’s popularity ratings have hit rock bottom. A bad feeling for all three parties, but for the FDP it is now a matter of survival.

The councilor is still in charge

However, without the FDP, Chancellor Olaf Scholz (SPD) would no longer have a majority in parliament. This would not mean that there would be new elections. The SPD and the Greens can also continue as a minority government and try to demand major changes in the Bundestag for their plans. The strongest opposition force, the centre-right Christian Democratic Union (CDU) and the Christian Social Union (CSU) are currently unable to form a majority in the Bundestag against the SPD and the Greens.

However, Chancellor Scholz wants to prevent the division of the corporation at all costs. He has been holding crisis talks in the Chancellery since the weekend. First with SPD party leaders, then FDP leader Lindner on Sunday evening. On Monday, government spokesman Steffen Hebestreit announced that three meetings between Scholz, Habeck and Lindner were scheduled in the next few days.

“There’s a lot going on right now under high pressure,” Hebestreit emphasized. The aim, he said, is to present a “general theory” based on various proposals for economic policy.

“The government will do its job,” Scholz said when asked by reporters on the sidelines of a meeting with NATO Secretary General Mark Rutte in Berlin on Monday if his government was unstable. “I’m the Chancellor, it’s about pragmatism not ideology,” Scholz said sternly.

Next steps

A series of closed-door meetings will culminate in a meeting of union representatives on Wednesday (November 6). Now, for the first time in weeks, the leaders of the three parties and their parliamentary groups will be sitting at the same table. They will have to look each other in the eye and clarify what they are agreeing on.

There is great time pressure, as the 2025 budget must be passed in the Bundestag at the end of November. The so-called transition meeting of the Finance Committee, in which the package is finalized, is scheduled for November 14. The budget plan still has a shortfall of several billion euros.

In his economic letter, Linder proposed a reduction in welfare payments called “citizens’ consent.” To fill the holes in the budget he also suggested using the ten billion euros that were originally intended to help the new Intel chip company that has been stopped.

Again, the Green Party has shown its ability to compromise. Economy Minister Robert Habeck has agreed to Lindner’s plan to use the money earmarked for Intel to close budget gaps rather than insisting on staying in the Climate Change Fund to promote climate projects and the development of new technologies. The funds can “actually now contribute to reducing the financial gap,” Habeck told reporters in Berlin on Monday evening, adding: “Obviously we have to contribute to the areas many and to take extraordinary measures.”

On Monday, Esken was also willing to ease the tension. “It is not about war,” he said. “We are not inclined to let the corporation fail, we need a responsible government,” he said.

The Greens also warn against isolation. “VW is going down, there are elections in the United States, Spain is suffering from severe floods and the Russians are invading one side after another in Ukraine,” said Green Party leader Omid Nouripour. . “This requires a new level of seriousness and we are looking for this again in this merger.”

This article was originally written in German.

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