German government faces make-or-break talks amid budget crisis
According to Politico, "Critical talks" have been scheduled for Tuesday and Wednesday in the German coalition, which is already on shaky ground. This is a pivotal week that could spell the end of Chancellor Olaf Scholz's government. The Berlin government is currently embroiled in a budget dispute.
5 November 2024 11:01
This week, Chancellor Olaf Scholz will be holding discussions 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 regarding next year’s budget.
On November 1st, a draft of the FDP programme was leaked. The Finance Minister unveiled in the document a plan for tax cuts and the limitation of the previously adopted climate policy. Politico notes that these proposals align with the FDP’s approach to a balanced budget but contradict the plans of the SPD and the Greens.
The document is 18 pages long and has been likened to a 1982 draft by the then-Minister of Economy, Otto Graf Lambsdorff (also from the FDP). Lambsdorff's ideas, Politico reminds us, led to the fall of the government headed by the SPD and subsequently enabled the Christian Democrats, leading to Helmut Kohl's 16-year rule.
Lindner’s document was intended to "shock" the Chancellor’s office. Consequently, Scholz decided to organise meetings with coalition partners that could conclude in one of two ways: either the coalition reaches an agreement, or the coalition partners part ways.
"The latter would mean either the collapse of the ruling coalition, resulting in early elections probably in the spring, or the FDP leaving the ruling coalition, allowing the SPD and the Greens to continue governing as a minority government," reports Politico.
Budget dispute
The government dispute revolves around a budget gap for 2025 amounting to approximately $3.5 billion CAD (it could potentially be larger) and the economic downturn—it’s all about securing additional funds for revitalization.
The symbol of Germany's challenges is the layoffs at Volkswagen factories. Tens of thousands of people are expected to lose their jobs. Volkswagen is selling fewer vehicles with combustion engines, particularly in China. In China, the transition to electric vehicles is advancing much faster than in Europe, and Chinese consumers prefer to buy from domestic manufacturers, partly due to price and better digitalization.
The key aspect of coalition talks will likely be the results of the US elections. Donald Trump's victory could "inspire the coalition to continue its course." The significance of the US elections was highlighted by the Greens' co-chair, Omid Nouripour.
“It will have serious consequences for our economy, our security, and the military situation throughout Europe,” explained Nouripour.
