BERLIN — Christian Lindner insists that Germany and the EU must return to strict fiscal discipline — but he’s leaving a small backdoor open for more spending in case the energy crisis escalates into a “sudden catastrophic challenge” this winter.
In an interview over Diet Coke in his office, the German finance minister doubled down on his opposition to southern EU countries’ demands that the climate emergency, the invasion of Ukraine or the related energy crisis should justify a significant derogation from the bloc’s fiscal rules. In the same vein, he wants Germany to return to the country’s constitutionally enshrined debt brake next year despite a giant €65 billion energy-cost relief package that the government announced on Sunday.
“Nothing is more dangerous for fighting inflation than an expansionary fiscal policy. All international organizations and also the Bundesbank advise stopping debt-funded government spending,” said Lindner. “Domestically, however, we are constantly engaged in a discourse about exceptions to the debt rules — even though we are presenting a very large budget.”
Lindner, who is also the leader of the liberal Free Democratic Party (FDP), has been facing growing pressure from his two coalition partners, the Social Democratic Party (SPD) of Chancellor Olaf Scholz and the Greens of Economy Minister Robert Habeck, to abandon his insistence on fiscal discipline in order to give the German government more financial leeway to cushion the socio-economic impact of the energy crisis as Russia is turning off the gas taps.
It’s a sensitive issue for the 43-year-old politician, who ran his electoral campaign last year by pledging to rein in public spending but has instead overseen a record buildup of debt during his first nine months in government — which caused the center-right opposition to call him Germany’s “king of debt.”
Earlier this week, Lindner raised eyebrows with an interview in German newspaper Süddeutsche Zeitung that was largely interpreted as a signal that he was open to suspend once more Germany’s debt rules in 2023, which had been suspended for the past three years amid the coronavirus crisis and the war in Ukraine.
Speaking to POLITICO on Wednesday, Lindner claimed that he had been “misunderstood” in that interview. “At least my coalition partners know my conviction, and everyone who bears responsibility for our country should know the constitutional law: Financing general projects with the exemption rule of the debt brake is simply not possible. That is not at our discretion.”
German lawmakers this week started discussions on the country’s budget for 2023, which Lindner said would “still take some effort on the part of all coalition partners.”
However, the liberal politician left a slender route open that would allow his government to react to a potentially worsening energy crisis this winter by doling out further financial support measures to companies and citizens — even if this would mean suspending the debt rules once more.
“In the event of an unforeseeable, sudden catastrophic challenge, this avenue is open.”
Lindner’s words will hardly satisfy southern EU countries, which on the one hand look with a certain envy at Germany’s big €65 billion relief package — a sum that many governments could not afford — and on the other hand are also concerned about the return of the EU’s debt rules, the Stability and Growth Pact, which is set to come back into force at the end of 2023.
Many southern capitals fear that the rules, if they’re not loosened, will force them into a new era of austerity at a time when the EU is building renewable sources of energy to reduce its carbon footprint — while weaning itself off of Russian fossil fuels amid Moscow’s war on Ukraine.
The issue will be high on the agenda as EU finance ministers gather on Friday for an informal meeting in Prague.
Yet Lindner dampened the hopes of southern countries that certain investments into green technologies or the boosting of European defense could be excluded from the common debt rules, saying that “politicians are very good at redefining everything possible as an investment, when in fact it is consumption that is behind it … The EU cannot afford everything.”
Tensions between Germany and Southern Europe could soon increase significantly as Italy heads to the ballot boxes later this month, with right-wing parties leading in the polls. Should those forces manage to form a government, tensions between Rome and Berlin but also Brussels risk souring over the question of public spending.
“It is no secret that the current Italian government has made very great progress and achieved a great deal for the country, certainly also with great sensitivity to the need for stable public finances,” Linder said. “I have met a strong and important voice in my [current counterpart] Daniele Franco, and I hope that the good arguments that have already shaped the Italian government to a very large extent will then also be carried forward into the next government,” he added.
Speaking of broader European context, Lindner expressed hoped that “over the next few years we will see steps toward normality again …. [so that we can] return to sound finances and strive for fiscal neutrality.”
The FDP politician also weighed in on the controversial announcement by Economy Minister Habeck earlier this week, who said that despite the current energy crisis, Germany would not extend the regular runtime of its remaining three nuclear power plants beyond year’s end, and would only keep two out of these three plants as an “emergency reserve” until mid-April next year.
Although Lindner made clear that he supports Germany’s exit from nuclear energy in general, he expressed skepticism over Habeck’s decision to phase out the remaining nuclear plants in the midst of an energy crisis. “The German government has yet to form its collective opinion” on the issue, he said.
“It is clear that Robert Habeck is the minister politically responsible for the energy market and thus also for security of supply,” he continued. “But if legislation is now pending, then of course we want to and will ask precisely — also on the part of the Ministry of Finance — on what assumptions is this a recommendation, what follows from it, and are there possibly more convincing alternatives?”
Lindner argued that Habeck’s ministry just recently introduced a gas price surcharge to deal with increasing costs for energy suppliers, which is limited until the end of 2024.
“This is an indication that the current tense situation is not only expected for this winter,” he said, suggesting that this could also justify an extension of nuclear power until 2024.
“If Robert Habeck’s ministry itself is already making these forecasts [with respect to the gas price surcharge], then it seems advisable to me to apply this timeframe to other energy industry decisions as well,” he said.