By Andreas Rinke
BERLIN (Reuters) -Chancellor Olaf Scholz’s three-way alliance has agreed on Germany’s budget for 2024, following a month of tense negotiations after a court ruling threw its finances into disarray, three government sources told Reuters on Wednesday.
The breakthrough could help ease tensions in Scholz’s fractious coalition of his Social Democrats (SPD), the Greens and business-friendly Free Democrats (FDP) that have intensified over the budget crunch, as support slump to new record lows.
It could also provide some reassurance for businesses in Europe’s largest economy after the budget crisis forced the government to freeze major spending pledges focused on green initiatives and industry support, although uncertainty over Germany’s long-term financial plans remains.
The sources provided no details of the compromise.
Scholz, Finance Minister Christian Lindner of the FDP and Economy Minister Robert Habeck of the Greens will deliver statements at noon (1100 GMT), the government said.
Germany’s constitutional court ruled on Nov.
15 the coalition government’s decision to re-allocate 60 billion euros ($64.69 billion) of unused debt from the pandemic era to its climate and transformation fund was unconstitutional.
The ruling forced Scholz’s government to suspend a constitutionally enshrined “debt brake” for the 2023 budget and to re-think its 2024 plans given an estimated funding gap of around 17 billion euros in the 2024 budget of around 450 billion.
During the negotiations in recent weeks, Lindner insisted on re-imposing the debt brake for 2024, which restricts Germany’s public deficit to 0.35% of gross domestic product.
But Scholz and Habeck sought another suspension in 2024, for the fifth year in a row, to avoid spending cuts that could affect welfare benefits and investment in the transition to the green economy.
Regardless of Wednesday’s agreement, it is already clear that the lower house of parliament, the Bundestag, will not manage to finalise the 2024 budget this year.
From Jan.
1, there will be a provisional management of the budget. Lindner will have a greater role in this because he will have to authorise certain expenditures.
Such provisional budget management means that in contrast to the situation in the United States, the lack of an agreed budget does not lead to a spending freeze in the coming year.
($1 = 0.9276 euros)
(Reporting by Andreas Rinke, Writing by Kirsti Knolle and Sarah Marsh, editing by Linda Pasquini, Miranda Murray and Tomasz Janowski)
