Scholz announces reduced government spending, assures climate commitments unaffected

German chancellor Olaf Scholz has announced that the federal government is to reduce its spending and return to “fiscal policy normality” after state support for citizens and businesses during the pandemic and energy crisis significantly increased state spending, the ARD reports. During his speech at the Federation of German Industries’ (BDI) “Industry Day” event in Berlin on 19 July, Scholz said climate action, security policy and industrial strength will remain priorities of the government despite a return to pre-pandemic spending levels. “This will be the logic of our budget policy over the coming years,” he said. “Some subsidy or support programmes” will have to be reviewed, Scholz added, given the government’s “duty to steadily lead the country into the future after years of unparalleled debt-making.” However, Scholz confirmed that “Germany’s [energy] transformation plan stays,” adding that work to transform and build hydrogen infrastructure will continue unabated. BDI head Siegfried Russwurm criticised Scholz’s administration at the event, arguing that the “delta” between governmental ambitions and achievements was growing every day. “Some things are going in completely the wrong direction,” Russwurm said, adding that bureaucratic hurdles and lengthy licensing procedures continue to pose challenges for industry. The chancellor replied that energy costs could have already been significantly lower if expansion of renewable power and grid infrastructure had not slowed in recent years.

Finance minister Christian Lindner from the low-tax, pro-business Free Democrats (FDP) recently sent a letter to ministerial colleagues outlining the need for each department to save money in the coming years, in order to close a budget deficit of about 20 billion euros. However, planned investments in climate action, industry resilience, housing, transport infrastructure, the military, and social support programmes mean that many ministries project spending increases in the near future.