“Scholz ditches Lindner.” Three words that pack a punch for Germans, after three years in which Free Democrats (FDP) leader Christian Lindner set an austerian tone for the coalition government. The split between Chancellor Olaf Scholz and Finance Minister Lindner has other momentous consequences: a paralyzed government, a looming confidence vote, and fresh elections, indeed in the middle of an economic crisis. The situation for the economy and households is set to get even worse. For there is no end in sight to Germany’s recession — and with Donald Trump elected just the day before this government crisis, new trade wars are on the horizon.
The so-called traffic light coalition — until this week made up of Scholz’s Social Democrats (SPD), the Greens, and the smaller FDP — has been undermined by the same thing that doomed it from the start: the state of the public finances. The debt brake (a 2009 constitutional amendment that limits government deficits to a tiny 0.35 percent) remained in place even under this self-styled “progressive” administration, and there were no tax increases for billionaires to help steady the ship.
In the beginning, the coalition could get around the debt brake using various tricks. But with the heightening crisis, a ruling by the Federal Constitutional Court last November, and the ongoing recession, the noose tightened further. The government became practically unable to act. It could only take new initiatives that cost nothing and could generate tax revenue — for example, the incentives used to motivate pensioners or part-time workers to return to work or work more. The result: all of the coalition parties had to forget about most of the promises they had made to voters before their election in…
Auteur: Lukas Scholle
