(Bloomberg) -- Chancellor Olaf Scholz and top officials in his governing coalition will reconvene on Monday afternoon to try to seal an agreement on a revised 2024 budget, according to people familiar with the planning.
Social Democrat Scholz and his partners from the Greens and Free Democrats have been wrangling over next year’s finance plan for days as they continue to grapple with the fallout from last month’s court ruling limiting the use of off-budget funds.
The shock Nov. 15 judgment by Germany’s Constitutional Court upended the government’s decades-old practice of using the special pots to fund investments and called into question tens of billions of euros in debt-financed spending that has to be accounted for in the regular federal budget.
Scholz acknowledged at the weekend that the negotiations are “very difficult,” while at the same time ruling out cuts to social spending, green subsidies or military support for Ukraine.
Asked Monday to give an update on the talks, he told reporters: “The task is big but we have made so much progress that we can be very optimistic that we’ll be able to announce the result to you soon.”
Speaking at a news conference alongside visiting Dutch Premier Mark Rutte, he declined to give any details about the discussions.
At the regular government news conference Monday, spokesman Wolfgang Buechner said that the talks are “very advanced,” that “many issues have been clarified” and that the coalition is “confident and optimistic.”
If Scholz manages to seal a final agreement with Greens Economy Minister Robert Habeck and FDP Finance Minister Christian Lindner on Monday night or in the early hours of Tuesday, they may present it to the media on Tuesday morning, said the people, who asked not to be identified discussing confidential information.
Scholz and his ministers face a delicate balancing act, as they must come up with a new 2024 budget that complies with the court’s judgment without triggering additional legal challenges.
One option could be an emergency suspension of restrictions on net new borrowing, known as the “debt brake,” for a fifth straight year. Scholz’s SPD and the Greens support such a move, saying it’s justified by expenses linked to the ongoing war on Ukraine, while Lindner’s fiscally hawkish FDP opposes it.
To help plug a €17 billion ($18.3 billion) gap identified by Lindner next year, the coalition is considering additional measures including trimming subsidies seen as harmful to the environment and increasing the price on carbon emissions.
--With assistance from Kamil Kowalcze.
(Updates with details on timing, Scholz comments starting in first paragraph)
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