The first economy of the European Union will enter 2024 without general budgets. The differences between the parties that make up the Government of Chancellor Olaf Scholz on how to settle accounts with the recent ruling of the Constitutional Court are so deep that the prospects of an agreement before Christmas have vanished. This is what the first secretary of the Social Democratic parliamentary group (SPD) Katja Mast has made known to her colleagues. “Although we have done everything possible to achieve this, the budget for 2024 can no longer be approved on time this year,” she emphasizes.
The negotiations between Scholz, the Minister of Economy, Robert Habeck, representing the Green party, and the head of Finance, Christian Lidner, as head of the liberals of the FDP, are stuck, thereby causing the biggest internal crisis in the coalition of government experienced until now.
The cause of the dispute is, among others, a ruling by the Federal Constitutional Court against the budget reorganization. As a consequence, not only are 60 billion euros missing that had been allocated to climate protection projects and modernization of the economy in four years, but it also affects several special funds financed with credits.
The first obstacle that the coalition has to overcome in the budgets for next year has many digits. It is 17,000 million euros. None of the parties is willing to renounce the amounts that had been assigned to their respective ministries prior to the TC ruling and the liberals refuse to lift their foot on the debt brake promised in the electoral campaign and an essential part of their DNA.
The SPD in particular had pushed for the 2024 budget to be approved this year. They wanted a political agreement before the conference that the party will hold this weekend and which he will attend as a guest on Saturday. Pedro Sánchez, Scholz will therefore go to congress empty-handed. The leader of the SPD, Lars Klingbeil, however, hopes for a “political clarification” before the end of the year. And he speaks of clarification because after an agreement between the leading trio, the matter will pass into other hands. “It is clear that the agreement does not depend on the three of them, but on the parties and parliamentary groups. Everyone must decide together with the Government,” stressed Klingbeil, for whom the way out of this budgetary -and political- crisis is to suspend the brake. of the debt declared an emergency situation, such as, for example, the war in Ukraine.
The FDP has flatly rejected that proposal. Lindner wants to cover the budget hole through savings: in social spending, development aid and subsidies. The SPD and the Greens are opposed. In the end there will be concessions, but none will arrive in time to finish the parliamentary process before 2023.
This means that provisional budget management will come into force at the end of the year, that the different ministries will only be able to spend what is strictly necessary and that new projects will not be able to start. The Federal Ministry of Finance will monitor compliance with the guidelines and may prevent or authorize significant expenditures. This is the procedure applied after a general election, when the new government lacks time or cannot draw up its own budget before the turn of the year.
