Germany is expected to take in less tax revenue next year, after relief measures were implemented to tackle inflation. The shortage could complicate ties between the three parties in Chancellor Olaf Scholz's coalition.
Lindner has said Germany should only spend what it takes in, and refrain from going into debt Image: Leon Kuegeler/photothek/IMAGO
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The German Finance Ministry said Thursday that government tax revenue will be less than expected in 2024, adding to the challenges faced by Chancellor Olaf Scholz's government.
Berlin would take in €30.8 billion ($33.6 billion) less than anticipated in the coming year, the ministry said in a biannual estimate.
German Finance Minister Christian Lindner said the drop in revenue was due to recent tax relief measures intended to help citizens cope with inflation and the rising cost of living.
Lindner touts tax relief, but urges fiscal restraint
Lindner touted the government's efforts to give money back to individuals and businesses during difficult economic times.
At the same time, Lindner said Germany does not have a tax revenue problem: "We are a high tax country."
The leader of the business-focused Free Democratic Party said Berlin must tighten it's belt and resist new expenditures.
"Instead of constantly inventing new spending programs, we must return to a stability and supply-oriented fiscal policy," Lindner said.
The finance minister is particularly keen on fulfilling the electoral promise of reinstating the so-called "Schuldenbremse" (debt brake), which is enshrined in Germany's Basic Law or constitution.
The rule, which limits Germany's debt-to-GDP ratio, was suspended in 2020, as the government took fiscal action to boost the economy amid the COVID-19 pandemic.
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Tensions within the coalition
Lindner's statements urging fiscal restraint could put him at odds with the two other parties in Germany's ruling coalition, the center-left SPD and the environmentalist Greens.
Both the SPD and Greens have fought against cuts to social programs in the next budget. The Greens in particular have called for new investments to transition to a more climate neutral economy.
German government budget sticking points
Germany's three-party coalition government is hammering out its budget for 2024. But some 30 measures are disputed. Here's what the parties can't agree on.
Image: Kay Nietfeld/dpa/picture alliance
Fossil fuel heating phase-out
Vice-Chancellor and Economy Minister Robert Habeck (Greens) has said he wants to bring forward by one year a ban on the installation of new oil or gas heating systems. This measure, agreed in the coalition treaty, is to apply from 2024. Old heating systems are to be replaced by 2045. The neoliberal FDP deplores the hefty price tag for German property owners.
Image: Goldmann/picture alliance
Phasing out combustion engines
The Greens and SPD are in line with the European Union in its plans to phase out new cars with combustion engines, in favor of electric cars. But the FDP wants to see an exemption for cars that use synthetic fuels or "e-fuels" which is seen as pandering to German car makers. Transport Minister Volker Wissing (FDP) has thrown a spanner into the works of the EU's Green Deal.
Image: Silas Stein/dpa/picture alliance
Infrastructure: Autobahn versus rail
The FDP, which heads the Transport Ministry, is keen to push for the faster construction of highways, while the Greens want transport resources to go into the accelerated expansion and construction of new rail lines. This falls in line with the FDP's refusal to impose speed limits on the highways, which some studies show would help reduce CO2 emissions.
Image: Jochen Tack/dpa/picture alliance
Pensions and healthcare
German society is aging. The pension system is ailing, and so are the health and above all the care sector. Health Minister Karl Lauterbach (SPD) wants more money for the reform plans, but Finance Minister Christian Lindner (FDP) says that not everything can be solved with money. He has plans to boost retirement funds through investment on the stock market.
Image: Matthias Bein/dpa/picture alliance
Fighting child obesity
One in six children in Germany is overweight. Now, Food and Agriculture Minister Cem Özdemir from the Green Party wants to ban daytime advertising for junk food. But the candy industry is fighting back, and the FDP is opposed to imposing restrictions.
Image: Oliver Berg/dpa/picture alliance
'Basic Child Security' plan
The SPD has pushed through the minimum wage hike, has pledged to subsidize affordable housing, and now it backs Family Minister Lisa Paus (Greens) in her bid to bundle child benefits from 2025 and scrap bureaucratic hurdles. Her 'Basic Child Security' package comes with a price tag of €12 billion ($12.8 billion), but FDP Finance Minister Christian Lindner is skeptical.
Image: Julian Stratenschulte/dpa/picture alliance
Immigration
The SPD and Greens want to facilitate skilled immigration and speed up the citizenship process. Justice Minister Marco Buschmann (FDP) is digging in its heels, he is skeptical about introducing dual citizenship and wants to emphasize the prevention of unregulated migration.
Image: Daniel Bockwoldt/dpa/picture alliance
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The FDP has also ruled out tax increases to fund new investments or government programs, due to the negative impact on the economy.
The three parties are struggling to reach a compromise on the issue, with Lindner saying a decision expected on the budget set for June 21 will have to be pushed back.
Meanwhile, the opposition conservative Christian Democratic Union (CDU) has criticized the government's "lethargic" budgetary policy.
Christian Haase, a member of the CDU who sits on the Budget Committee in the Bundestag, has also derided the SPD and Green as "utopians" who must be stopped.
wd/jcg (Reuters, AFP, dpa)
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