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Germany’s finance minister said Thursday that modest tax revenues will force the government to restrain spending, fuelling a budget row within Chancellor Olaf Scholz’s three-party coalition.
The government is split between fiscal hawks who oppose new borrowing and proponents of more spending to shake Europe’s biggest economy out of years of stagnation.
“New spending requests cannot be met,” said Christian Lindner of the liberal FDP, presenting a projection of tax revenues.
“There is no new scope for manoeuvre in the budget. On the contrary: we will have to consolidate further,” Lindner said in a pointed message to his coalition partners.
He said federal tax revenues for 2024 would be over three billion euros lower than predicted, and those for 2025 up only slightly on previous projections, citing a panel of ministry and academic experts.
Total tax revenues for the federal government, states and municipalities are now expected to be 12.7 billion euros lower in 2025 than was forecast six months ago.
The figures mean that “we cannot rely on tax revenues to keep flowing,” he said in a video conference from Washington where he was to attend an IMF meeting.
The 2025 budget has been the subject of fierce wrangling between Scholz’s centre-left Social Democrats, the Greens of Economy Minister Robert Habeck, and Lindner’s FDP.
A previous budget battle brought the government to the brink of collapse in July, and tensions are flaring again as all three parties enter campaign mode ahead of elections set for September 2025.
Lindner is a passionate defender of Germany’s constitutionally enshrined “debt brake” that caps annual new borrowing at 0.35 percent of GDP.
He argues that Germany must cut red tape and rely on private investment rather than state subsidies to boost economic growth.
“It is high time that we focus on what will put our country back on the road to success: a real turnaround towards more dynamism,” he said.
The debate flared again this week when Habeck proposed a massive investment programme to help German business, only for Lindner to quickly slap the idea down.
The budget for next year must be nailed down in parliament by mid-November. The conservative CDU/CSU opposition has demanded snap elections should the budget talks fail.
The FDP has flirted with the idea of bolting the coalition, which would spell fresh turmoil.
On Thursday, Lindner again hinted that he is considering all options: “We have arrived in what I have called the autumn of decisions.”
Germany, long a driver of European growth, was the world’s only major advanced economy to shrink in 2023 as it battled high inflation, an industrial slowdown and cooling export demand.
It is expected to contract again this year, by 0.2 percent, ahead of a slow recovery anticipated next year.
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