German coalition at crossroads amid budget turmoil
According to Politico, "Critical talks" have been scheduled for Tuesday and Wednesday within the German coalition, which is already on unstable ground. This is a pivotal week that could mark the end of Chancellor Olaf Scholz's government. The Berlin government is currently embroiled in a budgetary dispute.
5 November 2024 09:54
This week, Chancellor Olaf Scholz will confer with the Minister of Economy, Robert Habeck of the Greens, and Finance Minister Christian Lindner from the Free Democratic Party (FDP). The politicians aim to resolve the crisis related to the conflict over next year’s budget.
On 1st November, a draft of the FDP's programme was leaked. The Finance Minister outlined a plan for tax cuts and the scaling back of the already adopted climate policy in the document. Politico notes that these proposals align with the FDP’s approach to a balanced budget but contradict the programmes of the SPD and the Greens.
The document is 18 pages long and has been compared to a 1982 draft by the then Minister of Economy, Otto Graf Lambsdorff (also from the FDP). Lambsdorff's ideas remind Politico that led to the collapse of the government headed by the SPD, subsequently enabling the Christian Democrats and Helmut Kohl's 16-year rule.
Lindner’s document was intended to "shock" the Chancellor’s office. As a consequence, Scholz decided to organize meetings with coalition partners that could conclude in two ways: either the coalition reached an agreement, or the coalition partners went their separate ways.
"The latter scenario would mean either the collapse of the ruling coalition, leading to early elections, likely in the spring, or the FDP leaving the ruling coalition, with the SPD and the Greens continuing to govern as a minority government," Politico suggests.
Budget dispute
The governmental conflict is related to a budget gap for 2025, amounting to €2,400 million (potentially larger), alongside the economic slowdown. It is crucial to find additional funds to stimulate the economy.
The emblem of Germany's issues is the job cuts in Volkswagen factories, with tens of thousands of people expected to lose their positions. Volkswagen is selling fewer vehicles with combustion engines, especially in China. In the Middle Kingdom, the transition to electric vehicles is advancing much faster than in Europe, and the Chinese prefer to buy from domestic manufacturers, partly due to pricing and superior digitalization.
The key aspect of coalition talks is likely to be the outcome of the US elections. Donald Trump's victory could "encourage the coalition to continue its current path." The Greens' co-chair, Omid Nouripour, emphasized the importance of the US elections.
"- It will have serious consequences for our economy, our security, and the military situation throughout Europe," Nouripour explained.
