What to expect from Germany’s would-be next finance minister

Germany’s next would-be federal finance minister has insisted that Berlin’s new coalition government will remain an “advocate for stability” on his watch, opposing any further EU fiscal integration.

Free Democratic Party (FDP) leader Christian Lindner infuriated his coalition negotiating partners on Thursday by promising a swift return to the pre-pandemic era of balanced budgets.

Both the Social Democratic Party (SPD) and Greens, the FDP’s likely coalition allies, have promised voters greater flexibility on borrowing and public deficits to finance investment in infrastructure and green industrial transformation.

But Mr Lindner told the Frankfurter Allgemeine (FAZ) daily that the next government’s task is to “activate private investment and work towards a fair balance of private and state”.

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Amid growing EU debate over new fiscal rules and a tighter economic and currency union, Mr Lindner said his party would defend “German interests”. Among these, he said, was to insist on the one-off nature of the Covid-19 recovery plan, co-financed by EU-issued bonds and underwritten by member states.

“The recovery fund was, correctly, described as an exception,” said Mr Lindner to the FAZ. “There is no constitutionally secure [two-thirds] majority for a fiscal union in the Bundestag. I would advise against speculative debates as long as the [original] €750 billion has not even been used.”

He dismissed talk of a similarly structured fund for the climate investment as a “subsidy regime financed by taxpayers which would lead to people hopping on the bandwagon and inefficient investment”.

Coalition agreement

The FDP leader said the preliminary coalition agreement his party reached with the SPD and Greens acknowledged that current euro zone debt rules provide “enough flexibility; that should be the negotiating position of the future federal government”.

Coalition talks entered stage two on Thursday, with 296 politicians negotiating over policy and 15 ministerial portfolios. SPD and Green negotiators reacted with irritation to what they viewed as Mr Lindner’s well-timed, premature provocation.

“It certainly hasn’t helped the mood,” one Green negotiator told The Irish Times.

Germany’s finance ministry is the biggest prize of coalition talks, given its influence on domestic, EU and global politics.

The stakes are particularly high for Mr Lindner and his FDP, high enough for him to break an agreement he made with the SPD and Greens not to negotiate in public.

After walking out on coalition talks in 2017, Mr Lindner is under pressure not to fail this time around. As well as EU red lines, the FDP is standing firm against SPD/Green tax hike plans for top earners, its key voter base.

Attention

Mr Lindner’s ambitions to be finance minister have attracted international attention. Nobel Prize-winning economist Joseph Stiglitz has dismissed Mr Lindner’s finance policies as a “series of conservative clichés... of a bygone era: the 1990s”.

German economist Clemens Fuest, president of Munich’s Ifo Institute, hit back, telling Die Zeit weekly: “In a world dominated by political support for more lax fiscal rules, a critical fiscal hawk as Germany’s finance minister can play a useful, balancing role.”