Subscriber OnlyBusiness

‘We had a golden decade before the pandemic where everything seemed financeable thanks to low interest rates’

German finance minister Christina Lindner on the challenges facing Germany, from the Ukraine war to inflation, low growth and low productivity

Organising an interview with Christian Lindner, Germany’s federal finance minister, is like speed-dating the Scarlet Pimpernel.

Our first proposed meeting – in his hulking, Nazi-era ministry in central Berlin – evaporates with 90 minutes’ notice. A second appointment is delayed, then cancelled altogether. The final, third attempt, begins more than an hour late, with effusive apologies – “I’m ridiculously busy at the moment” – and warm words for Ireland and his fiscally “like-minded” colleagues in Dublin.

On Tuesday, the 45-year-old was in Dublin to meet his Irish counterparts – Michael McGrath and Paschal Donohoe – for talks on global tax rules and bilateral co-operation.

The flying visit was a welcome respite from the gloom at home. Europe’s largest economy is gripped by a two-year recession, company order books are empty and ordinary Germans and managers alike are nervous about their energy bills, the climate, and how wars near and far will impinge on their futures.


Even by hectic modern standards Lindner’s political honeymoon as Germany’s second FDP finance minister – and the first in 55 years – was brief. Just 47 days after taking his oath, Russian tanks invaded Ukraine.

A finance minister already grappling with the cost of Germany’s multibillion pandemic “bazooka” of state spending and subsidies watched as the war sent energy costs spiralling – not to mention the costly search for an alternative to Russian gas. Then came the €100 billion fund to boost Germany’s struggling defence capabilities and other expensive projects, including extensive welfare reform.

‘The substance of our country – the know-how, the skilled workers, the SME-based economic structure – none of that has suddenly disappeared. We have a huge potential for turnaround’

—  Christian Lindner, Germany's federal finance minister

As a small-state liberal and lifelong Star Trek fan, were there times in the past two years when he would have wished he could beam himself elsewhere?

“I am thinking more of The Wrath of Khan,” says Lindner, “where Spock has to touch the engine’s nuclear core with his bare hands to save the Enterprise ship as a whole.”

Personal sacrifice for the greater good seems like a noble aim, particularly when nothing seems to be going his coalition’s way.

For all the challenges, Lindner sees “quite a bit of psychology at play: the long-term effects of the Corona pandemic, rising interest rates and the restructuring of energy infrastructure after Ukraine war”.

“But the substance of our country – the know-how, the skilled workers, the SME-based economic structure – none of that has suddenly disappeared,” he says. “We have a huge potential for turnaround.”

Domestic political observers have exhausted every traffic light metaphor to describe the struggles of Germany’s untested coalition of Social Democratic Party (SPD), Greens and FDP.

Like a mini-euro zone, these three ostensible allies argue constantly over whether it is better to spend or save Germany back to health. The Greens came on board in 2021 with the promise of a great climate leap forward with state spending to boost innovation and transform – save, even – Germany’s industrial base. The SPD promised to reverse unpopular social reforms – again with more spending. And the FDP promised voters – and secured coalition assurances – to cut taxes and reintroduce borrowing controls. It was jam for all – at no cost to the exchequer.

Until November, that is, when Germany’s highest court called time and plucked Mr Lindner’s federal budget like an early Christmas turkey.

The constitutional judges took exception to his ministry’s creative accounting, in particular pouring €60 billion of old pandemic programme wine into new climate investment bottles. This amounted to a breach of parliamentary budgetary procedures, they ruled, and undermined the constitutional fiscal brake. Since 2011, this limits annual federal borrowing to 0.35 per cent of gross domestic growth.

Just 11 days ago, Lindner presented a new budget that keeps borrowing within debt brake limits. To fill a €17 billion gap in this year’s accounts, however, he cut budgets for most ministries and slashed climate protection projects by billions of euro.

Despite the cuts, the budget retained the SPD’s generous welfare spending and will increase German aid to Ukraine this year to €8 billion. Following last weekend’s Trumpian taunts, Chancellor Olaf Scholz promised to hit the Nato defence spending minimum of 2 per cent of gross domestic product (GDP) – up from 1.6 per cent last year.

Pulling the new budget in record time from the wreckage of the court ruling was a remarkable turnaround. You might expect, with its promised tax cuts, even for positive headlines or a show of coalition unity. Instead, the bleak press coverage and internal bickering continues.

While Lindner is quick to exclude Chancellor Scholz from his criticism – ‘he brings together different positions in talks, something one should not underestimate’ – this chaotic term in office has a worrying whiff of deja vu all over again.

“A basic problem of this coalition is that the good results are not being communicated by the coalition partners equally,” says Lindner. What of the communication that his party is vetoing domestic and EU measures to boost its flagging popularity?

“That the FDP blocks things is an often-repeated claim,” he says. “I don’t consider it reproachable if a party wants to make decisions on the basis of the coalition agreement or the constitution.”

While Lindner is quick to exclude Chancellor Scholz from his criticism – “he brings together different positions in talks, something one should not underestimate” – this chaotic term in office has a worrying whiff of deja vu.

They will never forget their four punishing euro crisis years in Angela Merkel’s second-term government. In 2013, voters abandoned the party and it crashed out of the Bundestag on 4.8 per cent, just short of the five per cent hurdle.

That dark, historic departure was the making of Lindner. He snatched the party leadership from his luckless and now largely forgotten rival, and acknowledged that his party had fallen victim to bad luck and political pedantry.

The spiralling euro crisis – requiring huge state spending on job protection measures at home and bailouts aboard – were poison for liberal FDP voters.

Meanwhile, potential new voters, he said, were put off by his party’s “short-sighted” insistence on tax cuts in the middle of the euro crisis.

“We wanted to keep our word above all,” he told Der Spiegel magazine in 2013, “but in the financial situation of the time this appeared incompetent and unreasonable.”

So is today’s push – for austerity, balanced budgets and tax cuts – suddenly reasonable and competent? While critics say Germany’s debt brake is starving the Germany economy of investment cash, Lindner will “not open Pandora’s box”.

One idea gaining traction in Berlin is creating an independent body to green-light debt-financed investment projects only with proven, sustainable future value.

Lindner says such a proposals would distort government spending priorities: new debt for investment would allow politicians to squander money previously earmarked for investment on consumption giveaways.

“Even most high-minded motivations for changing the debt brake at the start of the negotiations are, by the end, replaced with an opportunistic majority,” he says. “Resisting this is a little like Odysseus who binds himself to the mast of his ship to not be tempted by the sirens.”

In its complex and emotional nature, the debt brake debate is Germany arguing with itself in much the same way as it did with its neighbours during the euro crisis.

Days after Germany and its allies secured tighter, post-pandemic fiscal rules in Brussels, Lindner dictates a long list of reasons to justify similar stringency at home.

Most urgent: the bills for pandemic borrowing landing in his Wilhelmstrasse post box. Some €40 billion in annual interest payments, an increase of a factor of nine in two years.

With a debt-to-GDP ratio of 64pc, Germany is four points above the Maastricht ceiling and, with bond rates creeping up near 3 per cent, he sees further burdens on the horizon.

“We had a golden decade before the pandemic where everything seemed financeable thanks to low interest rates,” he says. “But we are an ageing society and, with no major spikes likely in growth or productivity, we need to keep control of debt; otherwise our long-term debt sustainability is endangered.”

The clock is ticking for Germany’s coalition partners who, collectively, have shed 20 percentage points on their 2021 election night result. The FDP alone has lost seven points and is once more below the 5 per cent hurdle.

But after leading his party back into the Bundestag in 2017, Lindner does not appear concerned by those numbers – or fear a leadership heave.

“I have the ambition to achieve another two-digit result at the next election,” he says. “I – and others in the party – have good, strong nerves.”

Strong nerves will be no harm in the busy electoral year ahead, with voters poised to batter the three coalition parties in June’s European elections. Three eastern state elections in September, meanwhile, will be even more brutal for the FDP given that it is traditionally as weak in the east as the far-right Alternative für Deutschland (AfD) is strong.

After recent revelations about AfD’s radical deportation policies prompted huge public demonstrations around the country, Lindner hopes it marks the end of German “naivety towards the AfD”.

“It doesn’t want a different kind of politics, it wants a new system, but our system of liberal democracy and rule of law has proven itself,” he says.

Four years ago, it was the FDP in the eastern state of Thuringia that broke the first political taboo when local leader Thomas Kemmerich was voted in as prime minister with CDU and AfD votes.

Kemmerich stood down a day later, after much muddled party messaging and what he called “constant contact” with Lindner. By then the damage was done.

Today, Lindner insists that as federal leader, he has no influence over state party affairs and is confident the party will never flirt again with the extremist party.

“We have a clear party conference motion that rules out co-operation with the AfD,” he says. “The FDP is the opposite of the AfD and we are working on addressing the problems that made the party so big.”

From a tougher approach on immigration to climate transformation with an eye on affordability, he says the FDP remains an important corrective on his Berlin coalition partners’ leftist, statist instincts.

That is why, after dragging this year’s budget over the line on the second attempt, many see the budget 2025 talks as so crucial.

After a winter of discontent with mass transport and farmer strikes, there are signs of hope. Budget talks got off to a good start when the Green federal economics minister Robert Habeck – an anti-Lindner at cabinet – acknowledged that Germany is no longer competitive and that firms are too heavily taxed.

“That was a surprising acknowledgment for a Green politician but it’s a view I share,” says Lindner. “If the economics and finance minister of a country believe something has to happen for competitiveness, then it will be no surprise when something comes out of it.”

After Germany’s leading corporate lobbyist described the country’s business environment as “toxic”, in particular due to rising energy costs, the two ministries are working to address a sizeable reform backlog left by the Merkel era.

“We will work on a dynamisation package which tackles our weaknesses: labour market, bureaucracy, energy, taxes, investment in infrastructure,” he says.

For now Lindner dismisses talk of an FDP walkout and early elections. Given the existential threat his party faces, and its fall from grace with voters since 2011, this is perhaps wise

While those plans take shape, the German economy still remains weighed down by weak Chinese demand, lingering Ukraine shocks, rising interest rates and a moribund property market.

At the same time, small economic green shoots are appearing. While the influential Ifo and IfW economic institutes have lowered their most recent 2024 forecasts, they are more optimistic about next year and predict 1.3 per cent and 1.2 per cent growth respectively in 2025.

As everyday battles sap energy from ambitious plans for green and digital transformation, Germany’s traffic light coalition is drifting towards what liberal philosopher and sociologist Ralf Dahrendorf once called “political lag, where governments administer the past rather than define the future”.

For now Lindner dismisses talk of an FDP walkout and early elections. Given the existential threat his party faces, and its fall from grace with voters since 2011, this is perhaps wise.

“We had a political reality after the election where only this government constellation could come together,” he says. “Sometimes you have to do things that require a lot of courage.”

Given that Spock’s courage was rewarded, eventually, with one of cinema’s great comebacks, perhaps Germans will eventually embrace Lindner’s Vulcanomics to live long and prosper.