Greens want Merkel to pump up budget spending

The leader of Germany’s surging Greens party, a likely coalition partner in any new government, raised the pressure on Chancellor Angela Merkel’s conservatives to ditch their balanced budget goal and finance a climate protection plan with new debt.

The call by Robert Habeck comes after a senior government official said that the finance ministry, led by the centre-left Social Democrats (SPD), is considering the issuance of new debt to help finance a costly climate protection programme that Berlin wants to seal next month.

“The insistence on the ‘black zero’ (a balanced budget) is voodoo fiscal policy,” Mr Habeck said in a radio interview, adding that Ms Merkel’s Christian Democrats (CDU) should overcome their reluctance to finance additional public spending with new debt.

“We’ll need massive investments in climate protection,” Mr Habeck said, pointing to an already tight federal budget and little fiscal room for manoeuvre in the light of a slowing economy and sluggish tax revenues.

Annegret Kramp-Karrenbauer, CDU leader and new defence minister in Merkel’s cabinet, said she favoured sticking to the balanced budget goal. She said:

I think it would be wrong if we now said that we put aside the principle of the ‘black zero'

Since 2014, Ms Merkel’s government has managed to raise public spending without incurring new debt thanks to an unusually long growth cycle, record-high employment, buoyant tax revenues, and the ECB’s bond-buying plan.

But as Germany’s borrowing costs sink to new lows almost daily and its economy stalls amid weaker global demand and bruising trade disputes, the government is facing ever louder domestic and international calls to provide extra fiscal stimulus by running a small deficit again.

The Greens have surged in opinion polls over the past few months and are now breathing down the neck of Ms Merkel’s conservatives.

In a Forsa poll published yesterday, Merkel’s conservative CDU-CSU parties fell one percentage point to 26% while the Greens rose two points to 25%.

Through their electoral success in many federal states and the Bundesrat upper chamber of parliament, the Greens already have a major say in passing laws. “We’re actually already an almost governing party in the waiting,” Mr Habeck said. The SPD, which has seen its support crumble during its period as Ms Merkel’s junior coalition partner, is now weighing whether to quit the government.

Reuters