The spending limits are enshrined in Germany’s constitution, but political parties have bristled at the limitations as Europe’s biggest economy tries to boost a recovery held back by high energy prices following Russia’s invasion of Ukraine.
A dispute over spending led to the collapse of Germany’s government last week, when Chancellor Olaf Scholz fired finance minister Christian Lindner, ending a coalition between Scholz’s SPD, Lindner’s pro-market Free Democrats and the Greens.
Referring to signs of willingness for reform from the centre-right opposition, SPD leader Lars Klingbeil told the Handelsblatt newspaper: “That’s a good starting point for continuing straight away.”
Opposition leader Friedrich Merz of the conservative Christian Democrats (CDU) has said he could be open to reforming the debt brake, which limits Germany’s public deficit to 0.35% of gross domestic product, in certain circumstances.
Merz has been tipped to succeed Scholz as chancellor in snap elections set for Feb. 23, with the CDU currently leading in the polls.
“Perhaps people will then look back on this moment and understand what an opportunity the democratic centre parties missed here,” said Lars Klingbeil on Friday in social platform X.
Now would be the time for a responsible compromise by the Democrats, he said, asking the conservative CDU for an agreement, as reform requires a two-thirds majority in parliament.
“First the country, then the party,” he said. “We would be ready.”
Within the CDU, the debate about debt brake reform was reopened this year by Kai Wegner, the conservative mayor of Berlin. Several powerful CDU leaders from other regional governments have joined the push for reform because the states are more constrained than the federal government, having no structural leeway to incur new debt.
The services sector trade union Verdi welcomed the new openness of Merz to reform the debt brake.
“This is an insight into what is necessary,” Verdi’s head Frank Werneke told Reuters. “We have a massive investment backlog in Germany, over 180 billion euros in the municipal sector alone.”
If the next government also continues to modernise the armed forces and maintains its support for Ukraine, this will not be possible without additional borrowing, he said.
Source: Economy - investing.com
