(Bloomberg) -- German Finance Minister Christian Lindner said he expects the ruling coalition to reach a political agreement on the structure of a revised 2024 budget “in a couple of days” while conceding that it’s unlikely to make it through parliament before the end of the year as planned.
Chancellor Olaf Scholz’s three-party alliance has been forced to overhaul its finances following last month’s shock ruling by Germany’s highest court that restricted debt-financed spending via special funds outside the regular federal budget. Lindner has identified a gap of €17 billion ($18.3 billion) for next year that needs to be plugged with measures like spending cuts and reductions in subsidies.
Scholz, Economy Minister Robert Habeck and Lindner have agreed to resume negotiations on Friday afternoon after the finance minister returns from a meeting with European Union counterparts in Brussels, according to people familiar with the talks, who asked not to be identified discussing confidential planning.
They had been aiming to get the new budget signed off in cabinet and sent to parliament for approval by the end of December, but that timeline is now out of reach, the people said. That means Lindner will have to draw up a provisional plan to tide the government over into the early months of 2024.
“I have taken note that the coalition partners had a very ambitious timetable but it’s not a crisis if we don’t get a budget law until next year,” Lindner told reporters in the Belgian capital.
“The state is fully capable of functioning, no authorities will close, no wages will not be paid and nobody who’s expecting financial support will not receive it,” he added.
Lindner has repeatedly ruled out both tax increases and another suspension of restrictions on net new borrowing next year. A self-styled fiscal hawk, the chairman of the Free Democrats already had to agree to a supplementary budget for 2023 which included an exception from the mechanism known as the debt brake for a fourth straight year.
Senior officials from Scholz’s Social Democrats and Habeck’s Greens have called for another emergency suspension of the borrowing limit again in 2024, saying it’s justified due to Russia’s war on Ukraine and the government’s decision to provide Kyiv with more than €8 billion of additional military aid next year.
Asked whether investors should be worried about the budget turmoil in Europe’s biggest economy, Lindner insisted that Germany remains a “stability anchor,” with a declining debt-to GDP ratio and narrowing annual deficits.
“The best place to invest today is Germany,” Lindner said.
Scholz, Habeck and Lindner are expected to meet Sunday evening to finalize an accord on the 2024 budget, which they could then present to the media on Monday morning, according to the people.
--With assistance from Karin Matussek.
(Updates with details on budget timetable starting in first paragraph)
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