Storm brews over German budget plans

A storm is brewing in Germany's grand coalition government amid signs that the ambitious plans by the government might jeopardize its aim of balancing the budget by 2011.

Finance Minister Peer Steinbrück has rejected as unworkable spending requests sent to him by four government ministries that are too expensive for his overall budget plans.

But the ministries concerned – transport, research, education and economy – say their spending plans are part of political goals set by Chancellor Angela Merkel’s left-right government.

Development Minister Heidemarie Wieczorek-Zeul told the Financial Times Deutschland on Friday that her ministry’s spending request is to pay for what Merkel promised at a G8 summit in 2007 on reducing poverty and fighting disease in the developing world.

“My minister has only applied in 2009 for what the entire federal government – led by the chancellor – committed itself to internationally,” Wieczorek-Zeul told the paper.

Similar dismay came from Research and Development Minister Annette Schavan, who told the paper that her budget request was in line with government plans to devote three percent of Germany’s gross domestic product in R&D by 2010.

The aim of a balanced federal bugdet in 2010 “is a collective aim of the federal government and therefore a collective duty of all members of the government,” Merkel’s spokesman Thomas Steg told a news conference on Friday.

He stressed that conflicts were inevitable in view of the government’s aims and said that talks on working out a budget for 2009, which is due to be agreed upon by July, were still at an early stage.

“The chancellor expects … that a constructive, amicable solution to all budget issues is achievable,” Steg said.


EU ministers urge unity after Germany’s energy ‘bazooka’

EU finance ministers on Monday pleaded for unity after Germany announced a €200 billion plan to help German households and businesses pay for high energy prices, amid accusations that the EU's biggest economy was acting alone.

EU ministers urge unity after Germany's energy 'bazooka'

Europe is struggling with historically high energy prices as it faces an early autumn cold snap and a coming winter almost certainly to be endured without crucial Russian gas supplies because of the war in Ukraine.

Many EU countries have announced national programmes to shield consumers from the high prices. But Germany went the furthest on Friday when it announced its mammoth plan, which will see help pouring to Germans for two years.

Arriving to talk with his eurozone counterparts, German Finance Minister Christian Lindner insisted the spending was “proportionate” to the size of Germany’s economy and said his goal was to use as little of the money as possible.

READ ALSO: Germany to spend €200 billion to cap soaring energy costs

But Germany’s largesse rankled several EU capitals, some of which feared their industries could take severe blows while Germany’s sits protected, deforming the EU’s single market.

Outgoing Italian prime minister Mario Draghi has slammed Berlin for its lack of solidarity and coordination with EU partners.

French Finance Minister Bruno Le Maire, without directly criticizing Berlin, called on partners to agree a common strategy against the price shock and for countries to refrain from going it alone.

“The more this strategy is coordinated, united, the better it is for all of us,” he said.

Risk to ‘European unity’

Others pointed to the unprecedented solidarity shown in the Covid-19 crisis in which the 27 EU nations, against all expectations, approved a jointly financed €750 billion recovery plan.

“Solidarity is not only on the German shoulders, I think this is something that we have to deliver at European level,” said EU economics affairs commissioner Paolo Gentiloni.

“We have very good examples from the previous crisis on how solidarity can react to a crisis and also reassure financial markets. I think that this is our goal,” he said.

While a Covid-style recovery plan is not in the cards for now, Le Maire said €200 billion in loans and €20 billion in aid should be devoted to REPowerEU, a programme to help countries break their dependence on Russian gas.

READ ALSO: Will Germany set a gas price cap – and how would it work?

Bruegel, a highly influential think tank in Brussels, called the German plan a spending “bazooka” that many EU countries were unable to match, creating a potential source of animosity.

“If the German gas price brake gives German business a much better chance to survive the crisis than, say, Italian business, economic divergences in the EU could be deepened, and European unity on Russia undermined,” it said in a blog.