Germany: Scholz asks Habeck to skip COP amid budget impasse

German Economy Minister and Deputy Chancellor Robert Habeck will no longer fly to the COP28 climate summit in Dubai on Monday as previously planned, a government spokesman said on Sunday in Berlin. 

Habeck, from Germany's Greens, was originally scheduled to fly to the annual climate summit and then move on to Oman, Israel and Saudi Arabia, amid severe turbulence in the region given the conflict in Gaza.

However, he was asked by Chancellor Olaf Scholz to postpone the trip so that he could focus on the government's negotiations for a 2024 budget, after its original spending plans were deemed illegal by the constitutional court. 

"Robert Habeck is canceling his planned trip to COP and the region in consultation with, and at the request of, the federal chancellor, and postponing it to the next possible date," the spokesman said. 

Scholz and Foreign Minister Annalena Baerbock, also a member of the Greens like Habeck, were able to travel to COP28 on the German government's behalf earlier this week.

Time running short as Habeck, Scholz, Lindner seek accord 

The three-party coalition government is running out of time to find an internal agreement on how to plug a hole in the budget — estimated by Habeck to total around €17 billion (roughly $18.5 billion) for 2024 — and to then get it through parliament.

The three leading negotiators at present include Habeck and represent each party in the coalition. Chancellor Scholz is a Social Democrat (SPD), Habeck represents the Greens, and Finance Minister Christian Lindner leads the Free Democrats (FDP). 

"I am very optimistic that we are well on the way to reaching an agreement," Habeck said on ARD public television late on Sunday.

Most of the lights were left on in the chancellor's office in Berlin, the Kanzleramt, late on Sunday, seemingly indicating out-of-hours emergency work on the impasse. 

Kevin Kühnert, general secretary for the SPD, said on ZDF public television on Sunday night that negotiations were in progress as he was speaking. 

"Every free minute is being used by members of the government to create a draft budget for 2024 that satisfies the terms of the constitutional court ruling from Karslruhe," Kühnert said.  

Problem with the first budget 

Germany implemented a law several years ago known domestically as the "debt brake" that requires the federal and state governments to take on no new debt for their annual budgets. 

However, the law allows for governments to suspend the rule if it can demonstrate that borrowing is necessary to deal with emergency situations. 

The COVID pandemic, in particular, forced the government to declare such an emergency and to borrow large sums to pay for measures like furlough schemes. 

Berlin similarly set up a multi-year €100 billion "special fund" in light of Russia's invasion of Ukraine, which is being used to ensure Germany boosts defense spending to meet NATO targets with only some of those costs being part of the main budget. 

The problem came this year when the coalition tried to transfer some €60 billion in unused emergency COVID borrowing taken out in 2021. This fund was assigned for use on multi-year climate and infrastructure projects. 

But Germany's top court ruled that this could not be done under the debt brake rules and declared the budget void. It also ruled that, going forward, governments could not stockpile emergency borrowing from previous years for future use. 

And why is the coalition struggling to find a workaround? 

The government last week suspended the debt brake for 2023, to cover funds like energy subsidies and flood relief payments that the constitutional court also deemed illegitimate, with the money already spent.

In theory, this might have been an option for 2024 as well. But Finance Minister Lindner in particular, who represents the most fiscally conservative party in the coalition, opposes declaring another emergency and also says there's insufficient grounds to do so.  

So Scholz, Habeck, Lindner and their parties are currently trying to agree on how to balance the numbers and where potentially to cut spending. 

The Greens had set their eyes on fossil fuel subsidies, arguing they were also ecologically counterproductive. Lindner recently said that spending 45% of the budget on social security was too much and that "we need to see how we can become more efficient there." Leading SPD members, meanwhile, have indicated they oppose cuts to social security.

What comes next? 

With Christmas approaching, time is very short in the Bundestag parliament. In order to get a draft budget through, involving several days of deliberation, it would probably need to be ready for scrutiny this coming week. 

Another option could be a later deal, emergency provisional approval for the new budget, and proper parliamentary scrutiny early in 2024. 

If no solution can be found, the situation could even topple the coalition altogether. But all sides in the government still say they're confident they can reach an agreement.

"It is a process that is arduous, one can see that, but it is making progress," Habeck said of the talks on Sunday.

msh/jsi (dpa, Reuters) 

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