Scholz plots $22b of budget cuts in snub to Greens

BLOOMBERG

German Chancellor Olaf Scholz and Finance Minister Christian Lindner are thrashing out a plan to close a €20 billion ($22 billion) shortfall in the 2024 budget with expenditure cuts in all departments except defense — a move which risks angering their coalition partners, the Greens. Scholz and Lindner have agreed to spending reductions of 2% to 3% for almost all ministries,. That’s enough to deliver about half of the savings required, but they are still to decide on how to find the rest of the money.
Lindner, leader of the pro-business Free Democrats, is calling for reductions in politically sensitive areas such as social spending, arguing that it’s the only way to achieve a solid budget, the people said. Scholz’s Social Democrats want to avoid such a step and, in particular, to exempt benefits for children threatened by poverty.
A finance ministry spokesman declined to comment on the plan and said that budget discussions are ongoing.
Whatever they decide on, it’s likely to cause problems with the Greens, the third party in the governing coalition. Economy Minister Robert Habeck, one of two senior Greens in the cabinet, has been calling for higher taxes instead to close the gap, particularly on higher earners.
“There are alternatives to unilateral austerity policy that would jeopardise economic recovery and endanger social and democratic cohesion,” said Sven-Christian Kindler, member of budget committee from the Greens. “We expect the Finance Minister to present a draft that can be agreed in the cabinet.”
Germany is facing a tighter budget outlook for next year in part because a far larger share of spending will be taken up by interest payments. The government is set to spend more than €40 billion on servicing its debt next year, compared with €4 billion in 2021.