Germany's Scholz confident that budget crisis can be overcome (updated)

Schaeffler AG

09/12/2023 10:50

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      Scholz says talks 'very difficult' but not insurmountable
    

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      Comments come as 2024 budget negotiations continue
    

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      Germany must be ready to send more Ukraine aid - Scholz
    

  
 (Adds context on budget talks, Scholz comments on Ukraine in
paragraphs 13-14)
    By Andreas Rinke and Christoph Steitz
       BERLIN/FRANKFURT, Dec 9 (Reuters) - German Chancellor
Olaf Scholz said on Saturday he was confident that tough talks
with coalition partners to fix the country's 2024 budget
following a landmark court ruling would eventually result in a
deal.
    Speaking at the Social Democrats (SPD) party conference,
Scholz made clear, however, that there would be no cuts to the
welfare state, an area where Finance Minister Christian Lindner
from the fiscally conservative Free Democrats (FDP) has called
for reform.
    "It is a very difficult task," Scholz told party delegates
in reference to the ongoing budget talks.
    "But I would like to take this opportunity to convey the
confidence that we will succeed. And that we will succeed in a
way that is important for the future of this country," he added.
    Lindner said earlier this week that a political agreement on
the structure of next year's budget was likely to come in a
couple of days.
    Scholz's governing alliance, which also comprises the Green
Party, is reeling from the ruling by the constitutional court
last month that has torn a 60-billion-euro ($65 billion) hole in
its finances and forced it to suspend a constitutionally
enshrined "debt brake" for the 2023 budget.
    Ongoing talks are focused on whether a debt brake suspension
is also possible for next year to plug a 17-billion-euro budget
gap, leaving spending on industrial projects, climate policy and
welfare up in the air.
    
    UKRAINE AID
    As a result, industrial firms have sounded the alarm over
what they say is major uncertainty over how Germany plans to
fund its transition towards carbon neutrality, which is at the
heart of the current government's political programme.
    "The general mood is becoming increasingly negative across
the industry," Klaus Rosenfeld, chief executive of auto supplier
Schaeffler  SHA_p.DE , told German magazine Focus.
    On Friday, the SPD agreed the need for a reform in the
medium term of the country's self-imposed borrowing limits to
give the state more room for manoeuvre.
    Scholz, whose public ratings fell to a record low in a
recent survey by broadcaster ARD, said the budget negotiations
were no "insurmountable task" but required a common
understanding across the three-way coalition.
    "But it is very clear to me that there will be no
dismantling of the welfare state in Germany in a situation like
this," he said.
    He also reiterated that the world faced a drawn-out war in
Ukraine following Russia's invasion in February 2022, saying
Germany needed to be ready to continue with aid efforts to Kyiv
until 2025.
    "That is why, if necessary and others are paring back, we
must be able to possibly make an even greater contribution."
($1 = 0.9293 euros)

 (Reporting by Andreas Rinke and Christoph Steitz; Editing by
Mark Potter and Helen Popper)
 ((christoph.steitz@thomsonreuters.com; +49 30 220 133 647;))