Lindner’s trick: How the government pays billions back in debt

Minister of Finance Christian Lindner wants to comply with the debt brake again from 2023.
picture alliance / dpa | Kay Nietfeld

After 140 billion euros in new debt this year and another 100 billion to the Bundeswehr, Finance Minister Christian Lindner (FDP) wants to meet the debt brake again from next year.

Not an easy task given the war in Ukraine, concerns about inflation and the sluggish economic recovery following the Corona crisis.

However, the coalition is using a trick to gain more economic leeway.

The Federal Minister of Finance is in a good mood. Christian Lindner arrived at the Bundestag four minutes before the start of the session on Tuesday morning, greeted his FDP colleagues with a handshake and a wide laugh. However, the figures discussed at the time in the budget debate have not necessarily improved his mood.

His ministry is responsible for debts of around 140 billion euros this year. An additional € 100 billion in debt will be added to the Bundeswehr. However, this debt should not be called debt, but should be renamed as “special assets”.

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There is also no other special fund in the current budget: the Climate and Transformation Fund. This has credit authorizations of 60 billion euros. CDU politician Mathias Middelberg called these 60 billion “stolen goods” because they were simply redirected by the traffic light coalition. They were originally planned under the previous government (CDU / CSU and SPD) for the Corona crisis.

Does it always go on like this?

At least at the request of Minister of Finance Lindner, the indebtedness will soon cease. He has announced that he intends to comply with the debt brake again next year. It is not negotiable for him, Linder said. The debt brake allows a maximum of about ten billion euros in new debt each year. But Lindner now stresses that the state must stand permanently out of debt. “I have a nausea for the high debt we have to incur,” he told ZDF. However, it is quite open whether it will actually be possible to comply with the debt brake in the coming year.

The economic recovery from the Corona crisis is still appalling, along with concerns about rising inflation and supply chain problems that Germany so desperately needs. Further help to the economy and to citizens suffering from high energy prices is quite conceivable.

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In addition, there are already additional expense requests. Labor Minister Hubertus Heil (SPD) first presented climate money over the weekend. This should relieve the citizens again, but Lindner has so far rejected the proposal.

So how does the traffic light government ever get down from this mountain of debt? There is a repayment schedule for the corona debt and the Bundeswehr’s special fund. Article 115 of the Constitution, which regulates the brake on debt, obliges this to be done. The old federal government, led by the CDU, had already planned it that way. She wanted to repay the corona debt from 2023 and be finished with it in 2042. Finance Minister Lindner generously extends this period, on Friday the traffic light coalition will decide that the repayment will start in 2028 and the last euro should not be transferred until 2058.

Lindner gives himself time for 2058

“These traffic light plans will therefore place a much greater burden on future generations,” criticized Reiner Holznagel, president of the Taxpayers’ Association, in an interview with Business Insider. The asylum reserve set up for the refugee crisis also provides scope. This includes 50 billion euros that Lindner could fall back on.

But Germany does not really have to pay back all its debt. Germany will never repay a large part of the debt, around 1.3 trillion euros, according to Holznagel. Instead, proceed as follows: If a repayment is completed after about 10 or 20 years, you take out a new loan to pay it off. It continues like this.

According to most experts, this approach is unproblematic because the mountain of debt will automatically fall – at least proportionally. What matters is the national debt ratio, ie the ratio between debt and economic strength. If economic power rises, the mountain of debt will fall. Therefore, the goal is to grow out of the crisis through an improving economy.

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