Social Democrats and Greens rebel against budget cuts in Germany for 2025

Closing budget plans is always a delicate and complicated issue in any country. But if we add to that three government partners – one of them very different ideologically -, a moment of economic weakness and a historic increase in the defense budget, the exercise can become a Herculean task.

The deadline set by the Minister of Finance, the liberal Christian Lindner, for the different ministries to present their savings proposals and their spending requests for the 2025 budget expired this Thursday, after having obtained a two-week extension.

According to information leaked in various media, many departments in the hands of environmentalist or social democratic partners have not followed the liberal politician’s guidelines. This is the case, for example, of Foreign Affairs, which according to the weekly Die Zeit This Thursday, Lindner was informed of a financing need of 7.39 billion euros, well above the 5.1 billion set by the Ministry of Finance for next year.

The Government of Olaf Scholz thus faces an arduous task and everything indicates that balancing the accounts will be even more complicated than the previous year, when almost in extremis. With a high budget gap of more than 20,000 million euros due, among other things, to the stagnation of the economy, which this year will barely grow 0.3% according to the latest government forecast, the German Finance Minister already warned months ago of that they would have to save. However, his associates oppose an austerity budget that could give more wings to the extreme right.

For now, Sven-Christian Kindler, budget manager for the Greens parliamentary group, warned this Thursday in the German newspaper Rheinische Postabout what“a harsh austerity program would aggravate the economic situation and endanger social peace and democratic stability.”

“There is a war in Europe, the economy is stagnant, the climate crisis is worsening and the social environment is polarized,” said the deputy about times that he recalled “are not normal” and in which it is necessary to “invest in the future.” , guarantee social security and protect democracy.”

Elections in 2025

Beyond these circumstances, and although there is still more than a year left for the general elections, political parties are already in electoral mode. And they are aware of the effect that the outcome of budget negotiations may have on their voters. Also facing the regional elections in September in the states of Saxony, Thuringia and Brandenburg, in which polls place the far-right Alternative for Germany party in first position.

“The negotiations have already proven to be very tough in the last two years and the will to compromise seems to have been exhausted on all sides,” explains Florian Neumeier, economist at the Ifo Institute.

The leaks about the problems within the Government already indicated that all departments would find reasons not to present savings plans and that no department will present figures that satisfy the Minister of Finance. However, the budget project must go through the German Executive on July 3.

Lindner is firmly opposed to raising taxes and taking on more debt, as his partners are calling for, and clings to the so-called debt brake included in the German Constitution, which stipulates that budgets must be balanced without income from loans and which can only be broken that rule in emergency situations.

“The budget requires painful but necessary cuts. If the Greens do not accept it, then they are abandoning the basis of this coalition,” he declared this Thursday to Der Spiegel Frank Schäffler, politician of the Free Democratic Party (FDP, in its German acronym). But from the social democratic side, the parliamentary vice president, Dirk Wiese, recalled through the same publication that it cannot be “savings at any price.”

Defense against social spending

The Minister of Defense, the social democrat Boris Pistorius, has already told Lindner that he wants 6.5 billion euros more, in addition to the regular defense budget of 52 billion euros currently planned and the special fund of 100 billion euros approved two years ago. , which will be almost entirely used by the end of this year. If the regular budget were not increased in 2025, Pistorius would only have €500 million left for investments, due to the army’s high operational and personnel costs. In addition, he expects the budget to be around 95 billion euros in 2028.

But the war in Ukraine and the historic increase in defense spending up to 2% of GDP, as NATO demands, cannot be detrimental to social benefit, as the social democratic party, the SPD, warns. For his part, the Minister of Economy, the environmentalist Robert Habeck, ensures climate protection.

According to economist Neumeier, despite the criticism of cutting social benefits, they will have to do it. “Social spending is by far the largest item in the federal budget, so it makes sense to look for potential savings there. However, cuts in this area have advantages and disadvantages,” he explains. But at the same time he warns that the argument put forward by Lindner of not creating more debt to protect younger generations from excessive burdens, although it cannot be ruled out outright, must be qualified. Because “if significant future investments are not made as a consequence of joining the debt brake, especially in education, infrastructure and climate protection, the damage for today’s young generation could also be enormous,” he argues.

Friedrich Heinemann, an economist at the ZEW Economic Institute, sees it the same way, who recommends that the Government spend more selectively and that social spending be analyzed as well. “There is a lot of room to improve budget efficiency.” In his opinion, to address the budget hole, “tougher sanctions on social assistance and a moderate reduction in benefits” should be applied. “We also need a pension reform with a further increase in the retirement age. This may not achieve much in the short term, but it may relieve the federal budget in the long term,” he notes.

Tensions will continue to grow. The newspaper Süddeutsche Zeitung He sums it up like this: “The conflict has only just begun.”

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