German Chancellor Olaf Scholz is set to meet with his two coalition partners to seek common ground after each presented conflicting plans to address the country’s struggling economy.
On Friday, a document leaked by Finance Minister Christian Lindner of the Free Democrats (FDP), a junior partner in the coalition, sparked controversy in Berlin. The document, advocating tax cuts and fiscal restraint, was seen as a counter to the investment plan recently proposed by Robert Habeck, the Green Economy Minister.
Attempts to reconcile differences before Wednesday’s meeting
The latest dispute among coalition partners—the FDP, Greens, and SPD—over economic and industrial policy has raised concerns about a potential coalition breakdown less than a year before the next election.
“Now that everyone has submitted their proposals, we need to see how they fit together,” a government source told Reuters. The source noted that Scholz plans to hold multiple meetings with Lindner and Habeck in the days leading up to Wednesday’s regular coalition committee meeting, which may prove decisive for the coalition’s future.
Habeck, a member of the Greens, aims to establish a multi-billion-euro fund to encourage investment while circumventing Germany’s strict fiscal rules. Meanwhile, Lindner advocates for tax cuts and an immediate halt to new regulations as a means to stimulate the economy. Additionally, Scholz recently convened with industry leaders to develop a “sector pact”—a move reportedly made without notifying his coalition partners.
Finance Minister Lindner’s proposals
According to Friday’s leaked document, Lindner is urging tax cuts and stricter fiscal policies. Representing the pro-market FDP in Scholz’s coalition, Lindner calls for “an economic turnaround through a partial overhaul of fundamental political decisions” in an 18-page policy paper from his ministry.
His plan includes tax cuts to spur economic growth and proposes the immediate abolition of the solidarity surcharge, an add-on to income and corporate taxes initially introduced to support Germany’s eastern states post-reunification. Lindner also suggests cutting €10 billion in subsidies, following Intel’s decision to cancel its semiconductor project—a reallocation of funds that Habeck had previously proposed.
Growing rift over FDP’s economic stance
While SPD leader Lars Klingbeil has signaled openness to parts of Lindner’s proposals, he indicated that some are unacceptable to his party. FDP board member Torsten Herbst further warned that “without a fundamental change in economic policy, there will be no basis for the federal budget—and thus no basis for the government.”
After a series of weak regional election results, the FDP has hinted at leaving the coalition this fall if its preferred policies are not adopted.
CDU backs FDP’s stance
The main opposition, the Christian Democrats and Christian Union (CDU/CSU), responded to the coalition tensions by calling for early elections. According to a recent poll, the coalition parties collectively hold 30% of the vote, trailing the CDU/CSU’s 32%.
CDU leader Friedrich Merz has expressed support for Lindner’s proposals, noting significant alignment between the FDP’s economic policies and those of the CDU/CSU. In his newsletter, “MerzMail,” he claimed that many of Lindner’s suggestions are similar to or directly sourced from CDU/CSU proposals in the Bundestag over the past two years.
