German coalition discusses tensions over money sharing

(Bloomberg) – Olaf Scholz’s candidacy to succeed Angela Merkel as German Chancellor is about to undergo a critical test as the two potential junior partners clash over fiscal policy ahead of a series of coalition talks this week.

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In a sign of the challenges ahead, Greens co-leader Robert Habeck called for debt relief for European Union partners affected by the pandemic, while Volker Wissing, general secretary of the pro-business-friendly Free Democrats, reaffirmed the party’s red lines of no raising taxes and keeping constitutional debt limits.

Scholz’s Social Democrats are meeting with potential allies for 10 hours of talks on Monday, with four more hours of talks scheduled for Tuesday. Winfried Kretschmann, the Green Prime Minister of Baden-Württemberg, called the atmosphere “industrious”, while other officials walked into a conference center in Berlin without commenting.

The SPD, which narrowly beat Merkel’s Tories in the September 26 election, remain optimistic about their ability to reach a deal before the end of the year, according to Kevin Kuehnert, SPD board member .

“I think there is enough there to develop a common will to rule the first few months, and then there will be crises like in any government,” he said Monday in an interview with ARD television. . “This is completely normal, and this is why it is so important that the talks are conducted in a solid and serious manner.”

Although there are differences in fiscal policies, the three parties want Germany to invest in areas such as digitization, climate protection and education, Kuehnert said.

The optic projected a common goal and coordination, with Habeck and his co-leader Annalena Baerbock arriving at talks with FDP chairman Christian Lindner and Wissing. It was less obvious this weekend.

Habeck told Deutschlandfunk radio on Saturday that countries in southern Europe severely affected by the coronavirus should not be forced to repay their debt in accordance with the guidelines of the EU’s Stability and Growth Pact. He warned that drastic cuts to social programs could otherwise pave the way for fascism.

The friendly atmosphere in the initial talks should not belittle the fact that there remain “major differences” and many deep-rooted political conflicts between the three parties. “It is not yet a done deal,” he said.

The FDP takes a tougher line on public spending and wants a full re-application of EU restrictions on member states’ debt and deficits after the pandemic.

“Debt does not create a future,” Wissing told the Bild newspaper on Sunday, insisting that his party “would stick to this position”.

Kuehnert of the SPD said the parties should each relax their positions to reach an agreement. He appeared to offer an opening to the FDP by stating that a plan to change Germany’s so-called debt brake “is not really on the agenda” because there is no does not have enough parliamentary support.

But he said there were still many challenges to overcome in terms of setting budget priorities and creating “a fairer tax system,” he said. “There is still a long way to go. “

(updates with comments from the start of talks starting in the third paragraph)

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