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Germany's Scholz confident that budget crisis can be overcome



© Reuters. German Chancellor Olaf Scholz addresses the delegates of the SPD’s party convention in Berlin, Germany, December 9, 2023. REUTERS/Liesa Johannssen

By Andreas Rinke and Christoph Steitz

BERLIN/FRANKFURT (Reuters) -German Chancellor Olaf Scholz said on Saturday he was confident that tough talks with coalition partners to fix the country’s 2024 budget following a landmark court ruling would eventually result in a deal.

Speaking at the Social Democrats (SPD) party conference, Scholz made clear, however, that there would be no cuts to the welfare state, an area where Finance Minister Christian Lindner from the fiscally conservative Free Democrats (FDP) has called for reform.

“It is a very difficult task,” Scholz told party delegates in reference to the ongoing budget talks.

“But I would like to take this opportunity to convey the confidence that we will succeed. And that we will succeed in a way that is important for the future of this country,” he added.

Lindner said earlier this week that a political agreement on the structure of next year’s budget was likely to come in a couple of days.

Scholz’s governing alliance, which also comprises the Green Party, is reeling from the ruling by the constitutional court last month that has torn a 60-billion-euro ($65 billion) hole in its finances and forced it to suspend a constitutionally enshrined “debt brake” for the 2023 budget.

Ongoing talks are focused on whether a debt brake suspension is also possible for next year to plug a 17-billion-euro budget gap, leaving spending on industrial projects, climate policy and welfare up in the air.

UKRAINE AID

As a result, industrial firms have sounded the alarm over what they say is major uncertainty over how Germany plans to fund its transition towards carbon neutrality, which is at the heart of the current government’s political programme.

“The general mood is becoming increasingly negative across the industry,” Klaus Rosenfeld, chief executive of auto supplier Schaeffler, told German magazine Focus.

On Friday, the SPD agreed the need for a reform in the medium term of the country’s self-imposed borrowing limits to give the state more room for manoeuvre.

Scholz, whose public ratings fell to a record low in a recent survey by broadcaster ARD, said the budget negotiations were no “insurmountable task” but required a common understanding across the three-way coalition.

“But it is very clear to me that there will be no dismantling of the welfare state in Germany in a situation like this,” he said.

He also reiterated that the world faced a drawn-out war in Ukraine following Russia’s invasion in February 2022, saying Germany needed to be ready to continue with aid efforts to Kyiv until 2025.

“That is why, if necessary and others are paring back, we must be able to possibly make an even greater contribution.”

($1 = 0.9293 euros)



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