Will the "traffic light" break up?

“Indiscretion” shakes German government

How does Chancellor Olaf Scholz (right) react to the "indiscretion" from the office of Finance Minister Christian Lindner (left)?

(Bild: APA/AFP/Tobias SCHWARZ)

An "indiscretion" has shaken the foundations of the German "traffic light" coalition and could even seal the end of the cooperation. In an 18-page policy paper that has found its way into the public domain, Finance Minister Christian Lindner (FDP) calls for a complete change of direction in Germany's economic and financial policy and distances himself in part from the policies of the ruling traffic light coalition of the past three years.

In the 18-page paper, Lindner writes that challenges such as an investment backlog, low productivity and a special approach to climate protection have not only not been addressed by politicians in recent years, but have in some cases been "deliberately brought about". "Therefore, an economic turnaround with a fundamental revision of some key political decisions is necessary in order to avert damage to Germany as a business location." 

Specifically, the leader of the liberal FDP proposes an immediate stop to all new regulations and a reduction of verification and reporting obligations to a necessary minimum. "As an immediate measure, the solidarity surcharge, which is mainly paid by entrepreneurs, the self-employed, freelancers and the highly qualified, should be abolished," he continues in the paper he is presenting as Finance Minister. As a first step, the solidarity surcharge should be reduced by 2.5 percentage points to three percent in 2025 and abolished completely in 2027. At the same time, corporation tax should be reduced by two percentage points in 2025 and further reduced in additional steps in 2027 and 2029. The document explicitly criticizes Germany's special approach to climate policy.

Finance Minister Christian Lindner distances himself in part from the policies of the ruling traffic light coalition of the past three years. Can the marriage of convenience be continued?

(Bild: EPA)

With a view to the 2025 budget, Lindner is calling for further savings. The revenue base has been reduced by eleven billion euros. At the same time, however, expenditure on the citizens' income and the cost of housing as well as the promotion of renewable energy would continue to increase.  

FDP calls for "economic turnaround"
The FDP has long been calling for an "economic turnaround" and has proclaimed an "autumn of decisions". Demands such as the complete abolition of the solidarity surcharge are also well known. However, the timing of the new paper is explosive: just a week and a half ago, German Economics Minister Robert Habeck (Greens) once again proposed a billion-euro, debt-financed sovereign wealth fund to promote investment by companies. The FDP rejects this with reference to the debt brake.

The next few weeks are crucial
The policy paper, which according to Linder was leaked by an "indiscretion", has added fuel to the fire that is currently blazing within the coalition. German media are already talking about a "divorce paper". Chancellor spokesman Steffen Hebestreit emphasized on Friday that he did "not have the impression that anyone is about to beat the bushes". However, several FDP representatives emphasized that for them, remaining in the government alliance would depend on the decisions made in the coming weeks. 

On Thursday, Lindner did not want to explicitly commit to the continuation of the traffic light coalition. In an interview with "Der Spiegel", the Finance Minister merely said that he had no intention of leaving the "traffic light" coalition. The decisive factor for him was the upcoming budget negotiations.