In opposition, Germany’s Christian Lindner – leader of the liberal Free Democratic Party – was quick to call out anything that looked like budget trickery.
In his first Bundestag appearance as new federal finance minister on Thursday, Mr Lindner had to endure accusations of hypocritical creative accounting.
Looking on, many European capitals hope Mr Lindner will show equal creativity in the ongoing debate over the EU’s future financial foundations.
The row in Berlin is over a €60 billion supplementary budget to finance what Mr Lindner called “the transformation of one of the largest industrialised countries towards climate neutrality”.
This transformation is a core policy plank – and prestige project – of the Greens, one of the FDP’s new coalition partners along with the Social Democratic Party (SPD).
“It’s not just people who need a booster but also our economic development,” said Mr Lindner. “We cannot lose time to the pandemic.”
But the opposition Christian Democratic Union (CDU) has called foul and asked the constitutional court this week to check the legality of the budget, which repurposes unspent pandemic emergency funds.
In the Bundestag on Thursday, CDU finance spokesman Christian Haase accused Mr Lindner of “pick-pocket tricks”.
“In a miraculous transformation, corona loans become climate loans,” he said. “The pandemic is an exceptional emergency . . . climate change is a long-lasting challenge that we must put in our regular budget.”
Debt brake
Some constitutional lawyers say the finance minister’s move is problematic in at least two ways: it breaches a principle that budgets are only valid for one year and it strains the principles of the Bundestag’s debt brake.
This self-imposed measure forces German MPs to only back balanced budgets. Set aside in the pandemic, the FDP succeeded in coalition talks to reactivate the debt brake from 2023. Because the pro-business party also secured a guarantee of no new taxes, Mr Lindner’s first task as finance minister has been to pull together unspent money for climate investment.
While Germany’s political parties use the budget row to get used to their new roles, Mr Lindner’s praise on Thursday for “transformative investment” will cause ears to prick up around Europe.
In opposition, the FDP was traditionally a defender of Germany’s postwar social market economy favouring only a limited role for state intervention in the economy. But the new government appears ready to move beyond the love of balanced budgets and loathing of debt-financed investment.
Stable finances
On his first visit as finance minister to Paris, though, Mr Lindner spoke warmly of encouraging economic growth as “the best circumstance for stable finances”.
The German minister’s flexibility on how to achieve that economic growth chimes with the new coalition agreement, calling for a “simpler and more transparent” stability and growth pact – governing debt levels of euro members.
In addition, the coalition promises to “develop fiscal rules further . . . to strengthen their efficacy in light of the challenges of the time”.
Given Berlin will activate private investment and repurpose public money at home for its climate transformation, Germany’s Süddeutsche Zeitung daily sees a “back door” open at EU level. Some observers see a move to strike an ambitious new deal with France on rewriting post-pandemic EU and euro finance rules. Leading economists are more cautious.
“France is already working to rewrite the fiscal rules so that climate and investment projects are excluded from the deficit rule,” said Prof Lars Feld, one of the economic “wise men” advisers to the government. He sees Berlin more likely to agree to less far-reaching stability pact rewrites, such as allowing members stretch their debt-repayment periods.
“And for that,” he said, “Berlin should ask for something in return.”
