After three years of large public spending to confront the covid crises, the war in Ukraine and the increase in energy prices, Germany will impose extensive cuts in its 2024 budget to reduce debt. Only the Ministry of Defense is saved from the order to save. At the same time, the Government will try to stimulate the stagnant economy of Europe's locomotive with tax cuts and other fiscal relief for companies worth about 7 billion euros per year in the period 2024-2028.
“The State cannot buy economic growth,” said the German Finance Minister, the liberal Christian Lindner, in a meeting yesterday in Berlin with the Association of the Foreign Press in Germany (VAP). “I see with great skepticism the attempt to boost business with public money; In the end, the State can only distribute what citizens and companies have acquired and provided, and it is the private sector that guarantees growth,” defended the liberal politician.
The coalition Executive of Social Democrats, environmentalists and liberals of Chancellor Olaf Scholz presented the new budgets for debate in the Bundestag (lower house of Parliament) on Tuesday, with which Lindner hopes to put an end to several years of public spending due to the management of successive crisis. "It is about returning to the debt brake or, more precisely, to sustainable public finances in the long term," defended the minister, who reiterated that "the fight against inflation is the Government's first priority."
Lindner's budget bill for next year is 445 billion euros, around 30 billion less than in 2023, but still about 90 billion more than in 2019, the last budget before the pandemic. Between the years 2020 (pandemic and post-pandemic) and 2022 (beginning of the Russian invasion of Ukraine and energy crisis), the federal government suspended the constitutional debt brake mechanism, and incurred debt in various ways.
The liberal Lindner has linked his mandate to the promise to once again respect that constitutional limit and return to budgetary discipline as soon as possible. Thus, its budget project for 2024 includes 16.6 billion euros in new debt, 30 billion less than this year. Lindner warned of the rapid increase in public spending on debt repayment. Next year, he assured, interest payments alone will cost the German State 37 billion euros. “Interest costs in the budget are now double those of the Ministry of Education and Research budget,” he argued. We simply cannot afford rampant new debt; "They would not be financeable."
The German economy stagnated in the second quarter with zero growth, showing no signs of recovery from a winter recession of two consecutive quarters, in which GDP fell 0.4% (October to December 2022) and 0.1 % (January to March of this year). Furthermore, although German year-on-year inflation fell slightly in August, it did so less than expected. It stood at 6.1%, when in July it had been 6.2%, according to provisional data from the Federal Statistics Office (Destatis).
“It would be economically incorrect to continue with an expansionary fiscal policy; The eurozone considers that the time has come to end this phase. Germany is not a unique case in this,” argued Minister Christian Lindner.
The text began the parliamentary process this week, with debate in the Bundestag (lower house of Parliament) and a vote scheduled for the beginning of December. There is a consultation process with the länder and municipalities for possible adjustments. For this reason, the Social Democratic Chancellor, Olaf Scholz, proposed the day before yesterday in the Bundestag to the conservative opposition, the federal states and the municipalities a pact for Germany to modernize the country.
