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The cabinet gives its opinion on the budget: Lindner before the success of stage

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Status: 01/07/2022 04:21

The cabinet wants to adopt the draft federal budget 2023 today – including a debt brake, as Finance Minister Lindner points out. At a red light, however, the issue is likely to lead to lengthy debates.

By Martin Polansky, ARD Capital Studio

Finance Minister Christian Lindner of the FDP has repeatedly underlined this in recent months: the debt brake should be respected again in the 2023 federal budget. This was “not just any political intention”, Lindner said. “But it’s an order from our constitution to the legislature.”

In 2009, the debt brake was anchored in the Basic Law. The objective: the federal government should only be allowed to finance its budgets by borrowing to a very limited extent. The decision at the time was also influenced by the global financial and debt crisis of 2008.

However, the debt brake also provides special regulations for exceptional emergency situations. And with the onset of the corona pandemic, the resolution of the Bundestag came into play. The debt brake has been suspended since 2020. The federal government was able to take out loans on an unprecedented scale for three households in a row for meet the costs of the pandemic.

Is the “special situation” over?

From the perspective of Oliver Holtemöller, vice-president of the Leibniz Institute for Economic Research in Halle, this made perfect sense. In the exceptional situation of 2020, it was justified for the State to increase broad debt-financed aid to businesses and households. “It was true, it helped stabilize the economy,” Holtemöller said. “But this particular situation is over now. And just as it was good at the time to withdraw this instrument, it is also time to normalize the state budget and reduce net borrowing again.”

Within the traffic light coalition, however, this is assessed quite differently. During the preparation of the 2023 budget, the SPD and especially the Greens repeatedly attacked the debt brake.

Investment Priority Required

Only three weeks ago, SPD leader Saskia Esken said the debt brake should be discussed. Requirements should not prevent necessary investments from being made. An argument that the boss of the German Institute for Economic Research, Marcel Fratzscher, has constantly put forward. In the triad of debt brakes, state revenues and investments for the future, the latter should have priority, according to the economics researcher.

The Greens see it the same way. They also point out that there is still a special situation – because the war in Ukraine has now joined the corona pandemic. This requires rethinking in many places, says Andreas Audretsch, deputy chairman of the Green parliamentary group. “You have to do politics in the reality that you find yourself in,” Audretsch said recently.

This means that Robert Habeck goes to Qatar and, if in doubt, also asks how we can get gas in the short term. “We have war, we have the corona pandemic and supply chain issues.” We must perceive this reality and then do politics, according to the leader of the Green parliamentary group. “I would have the same requirement for the other members of this coalition.”

FDP Core Promise

A sentence aimed directly at Finance Minister Lindner. But for the FDP, compliance with the debt brake was the key campaign promise. Lindner has now hit a peg with his proposed budget. While the federal government still expects nearly 140 billion euros in new debt for the current year, this is only expected to be around 17 billion euros for the coming year. Lindner therefore announced with satisfaction on Wednesday: “I will submit to the cabinet a federal budget which respects the debt brake, the debt rule of the Basic Law.”

This should be made possible by a significant drop in pandemic-related spending, higher tax revenues due to inflation and by drawing on a reserve of 40 billion euros. And: In the budgets of the following years, the debt brake should also be respected, according to Lindner’s plan.

During the preparation of the budget, the Minister of Finance pushed back on major expenditure requests from the ministries – above all with reference to the debt brake, which was finally also agreed in the coalition agreement between the SPD, the Greens and the FDP.

Another argument of the Ministry of Finance: the loans are no longer paid after the fact. Inflation, uncertainty and tighter monetary policy have also increased debt interest payments. Lindner calculates interest charges of 30 billion euros for the coming year, while in 2021 they were only four billion euros.

Will the crisis buffer be sufficient?

However, Lindner’s draft budget with built-in debt brake is subject to many uncertainties. What’s next for the war in Ukraine and the economy? Will the local economy – as calculated – really grow by 2.5% in the coming year, which is important for incomes? Lindner built a certain crisis buffer into the draft budget – but what if it is used up quickly?

Economic researcher Holtemöller also considers the situation difficult to predict at the moment: “We have the war in Ukraine and the trend in energy prices. And in the longer term, we also have the energy transition. There are so many uncertainties that we have to assume that this one too Household is further improved.”

Cleared the first hurdle

The budgetary deliberations in the Bundestag will probably be decisive. According to the timetable, MPs are expected to consider Lindner’s draft between September and November before the figures are finally approved in mid-December.

It is conceivable that the SPD and especially the Greens will try to push through new spending during parliamentary deliberations – especially with regard to dealing with the consequences of the war in Ukraine. The coalition has already pledged additional aid due to rising energy prices. This could put the debt brake back under pressure.

Achim Post, vice-faction of the SPD, gave a little taste yesterday. He stressed in a press release that citizens would not be left behind in the most difficult times. And: “In case of doubt, this ability to act in the interest of our State takes precedence over abstract budgetary objectives.”

Finance Minister FDP Lindner has taken an important step. His draft budget, including a debt brake, should remove the first hurdle today – with the approval of the Federal Cabinet.

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Source www.tagesschau.de

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