The question was rising in German economic circles, while the government has multiplied in recent months the exceptional expenditure financed by the loan: the Minister of Finance, Christian Lindner, leader of the Liberal Democratic Party (FDP), reputed “hawk” of budgetary policy, would it have lost its greenhouses?
The update was given on Wednesday, May 11: in a strategic document, the Minister affirmed his intention to make debt reduction and the fight against inflation his priorities again, after a period deemed “very expansive”. “2023 marks the start of a new phase in fiscal policy”, did he declare.
It is therefore time for a return to strict rules on public debt, even though the Ministry of Finance is counting on much more comfortable tax revenues than anticipated in November 2021: an additional 40 billion euros this year and 220 billion euros by 2026, according to an estimate published Thursday, May 12.
For Christian Lindner, this unexpected rain of tax receipts is not an excuse to postpone the budgetary correction. “The current tax estimate comes at a time of great uncertainty,” he said Thursday. The day before, he had made a similar observation: “The war in Ukraine marks a turning point in many areas of German policy. » In addition to the inflection in terms of security, Germany has begun a costly weaning from its dependence on Russian hydrocarbons. At the same time, its economy is very affected by the measures against Covid-19 imposed in China and by the geopolitical disturbances, which affect international trade and supply chains. All this weighs on growth, which is at half mast, while inflation remains at a high level.
In fact of “rupture”, it constitutes above all a desire to return to the German ordoliberal tradition
The risk of a “era of stagflation” is real, Mr. Lindner summed up. According to him, the situation justifies a “Rupture for Germany’s economic, financial and budgetary policy”. The new strategy he defends, called “fiscal policy in the changing era” is a direct reference to the speech of Chancellor Olaf Scholz, delivered a few days after the Russian aggression in Ukraine. In fact of “rupture”, above all, it constitutes a desire to return to the German ordoliberal tradition. The text proposed by the minister was influenced by economist Lars Feld, a famous supporter of this liberal school, also present on Wednesday when the document was presented. Unsurprisingly, he advocates, “once the crisis has stabilized”a ” back to normal ” in public finances and the constitution of “safety reserves,” faced with the challenge of rising interest rates and the aging of the population.
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