Passengers make their way to the concourse after arriving at Berlin Central Station in Berlin, Germany, on Tuesday, May 16, 2023. Germany averted a nationwide train strike after state-owned Deutsche Bahn took the EVG union to labor court in a bid to resolve wage talks that have been dragging on for almost three months.Photo by Krisztian Bocsi /Bloomberg

German Finance Minister Calls for Cuts in Social Spending

Germany’s Finance Minister Christian Lindner plans cuts in areas including unemployment payments to close the €17 billion ($18.5 billion) gap in the country’s 2024 budget, according to Funke Mediengruppe.

by · Financial Post

(Bloomberg) — Germany’s Finance Minister Christian Lindner plans cuts in areas including unemployment payments to close the €17 billion ($18.5 billion) gap in the country’s 2024 budget, according to Funke Mediengruppe. 

“We will have to deal with three major cost blocks,” he told Funke newspapers in an interview published Saturday. Lindner, who leads the pro-market FDP party, highlighted welfare — which includes jobless support — international financial aid and other funding programs.

As Germany spends 45% of its annual budget on welfare, it’s is necessary to look at “how this can be made more effective”, Lindner said. “For example, it’s about getting people into work more quickly. That benefits people and it benefits the federal budget. There will be a job turbo for refugees from Ukraine, for instance.” 

With regard to the unemployment benefits, the finance minister pointed out that the inflation is slowing much more quickly than estimated when the standard rate was set for 2024, which means that he wants to have a closer look at the gap between wages and social benefits.

When asked whether the so-called debt brake — already deferred in 2023 — should also be suspended next year, the finance minister said that he’s “happy to listen to the arguments.” 

However, he’s “not yet” convinced that another pause could be constitutionally justified. In his opinion, the situation on the energy markets as a result of the war in Ukraine no longer warrants the emergency status required for a suspension.

Germany has been in a budget crisis since mid-November, when the country’s top court declared the allocation of €60 billion ($65 billion) unused pandemic aid for climate protection to special funds outside the regular budget as unconstitutional. The government is currently negotiating how to close the financial shortfall.