German coalition’s budget fight is back

BERLIN — It seemed, for a short while at least, that Germany’s tripartite coalition had averted a meltdown due to the budget divisions that have long dogged Chancellor Olaf Scholz’s government.

But Finance Minister Christian Lindner has now cast doubt on what had been billed as a key compromise in early July on a draft budget for 2025.

“It has now emerged that there are constitutional risks and questions of concrete implementation,” Lindner said in a TV interview with public broadcaster ZDF.

The July draft budget agreement, reached after an all-night negotiation between Scholz, a Social Democrat (SPD), Economy Minister Robert Habeck of the Greens, and Linder of the fiscally conservative Free Democrats (FDP), was met with relief in Berlin given the intractable differences between the coalition parties on matters of spending.

The deal was also seen as a must given the German coalition’s dismal performance in the European election, in which Scholz’s SPD recorded its worst result in a national vote in more than a century, while support for the Greens fell by nearly half. Given the coalition’s weakness, the survival of the government is largely dependent on whether it can reach a final budget agreement without a major clash.

Lindner’s announcement may now be leading to just such a clash.

Olaf Scholz’s SPD recorded its worst result in a national vote. | Pool Photo by Christoph Reichwein via Getty Images

Experts commissioned by the finance ministry concluded in assessments, news of which was leaked to the German newspaper Handelsblatt late last week, that the coalition’s draft budget deal is at risk of being annulled by the country’s courts, in large part because it plans to use €4.9 billion euros from Germany’s national development bank originally allotted to offset the cost of high gas prices for other purposes. Those assessments, Linder subsequently said, mean that German leaders will need to go back to the table to renegotiate the budget deal.

But politicians in the other two parties in Germany’s coalition — the left-wing Greens and SPD — were outraged that Lindner went to the media to discuss the assessment rather than handle the matter internally, accusing him of throwing his coalition partners under the bus in order to burnish his own political credentials as a fiscal hawk.

“You can only see that as self-promotion,” Kevin Kühnert, the SPD’s secretary general, told German public television. In a separate television interview, Kühnert accused Lindner and the FDP of wanting “to kick off renewed discussion about the welfare state in Germany.”

Lindner’s behavior “exceeds the limit of what is tolerable” inside a coalition, SPD Chairwoman Saskia Esken said. She also pushed back against the notion that coalition leaders must fundamentally reconsider the draft 2025 budget.

But Lindner defended his approach, pointing to the fact that the German government already suffered a huge blow late last year when the constitutional court issued a landmark ruling on that government’s spending practices that blew a massive hole in the country’s finances and made it impossible for Scholz’s coalition to continue to rely on a network of “special funds” outside the main budget. Those funds had allowed the coalition to spend while circumventing the constitutional debt brake, which restricts the federal deficit to 0.35 percent of GDP except in times of emergency.

“I carry the political responsibility for our state finances,” Lindner said in his public television interview in response to the criticism. “I once agreed to a coalition compromise that was shaky and was rejected by the constitutional court. That won’t happen to me a second time.”

To avoid another bout of prolonged infighting, the government is likely to have to reach a new draft deal — or at least to establish a common political understanding — within the next weeks. Given the rancor between politicians in the three parties, it remains an open question whether a new agreement is within reach.

A potentially greater hurdle will be in parliament, where parliamentarians from all three governing parties will have to hammer out the details of a final budget by the end of the year.