font size
Germany’s finance minister said on Thursday that low tax revenues would force the government to rein in spending, intensifying a budget dispute within Chancellor Olaf Scholz’s three-party coalition government.
The government is divided between fiscal hawks who oppose new borrowing and those who support increased spending to shake Europe’s largest economy out of years of stagnation.
“We cannot meet new spending demands,” Christian Lindner, from the liberal FDP, said of the tax revenue forecast.
“There is no room for new maneuvers in the budget. On the contrary, we need to further strengthen our finances,” Lindner said in a sharp message to his coalition partners.
He cited a committee made up of the ministry and academic experts as saying that federal tax revenues in 2024 will be more than 3 billion euros lower than expected, and that federal tax revenues in 2025 will only increase slightly compared to previous projections. said.
Total federal, state and local government tax revenues are expected to be 12.7 billion euros lower in 2025 than predicted six months ago.
The numbers mean “we can’t rely on tax revenue to continue flowing,” he said in a video conference from Washington, where he was scheduled to attend an IMF meeting.
A fierce debate continues over the 2025 budget between Scholz’s center-left Social Democrats, Green Party Economy Minister Robert Habeck, and Lindner’s FDP.
The last budget battle brought the government to the brink of collapse in July, but tensions are rising again with all three parties in campaign mode ahead of elections scheduled for September 2025.
Lindner is a passionate defender of Germany’s constitutional debt brake, which limits new borrowing per year to 0.35% of gross domestic product.
He argues that Germany should ditch red tape and rely on private investment rather than state subsidies to boost economic growth.
“The time has come to focus on what will put our country back on the path to success: a real shift toward greater dynamism,” he said.
The debate reignited this week when Habeck proposed a major investment program to support German companies, only for Lindner to quickly dismiss the idea.
Next year’s budget must be decided by Congress by mid-November. The conservative CDU/CSU opposition is calling for snap elections if budget negotiations fail.
The FDP has floated the idea of terminating the coalition government, but that would create new turmoil.
On Thursday, Lindner again hinted that he was considering all options, saying, “We’re in what I call the fall of decisions.”
Germany has long been a driving force in Europe’s growth, but the world’s only major developed economy will shrink in 2023 as it battles high inflation, a slowdown in industry and weak export demand.
With a gradual recovery expected next year, the economy is expected to contract by 0.2% this year as well.
bar/fz/fec/rl
