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The FDP fails because of reality

FDP celebrities meet every year on Epiphany in Stuttgart.

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The FDP fails because of reality

FDP celebrities meet every year on Epiphany in Stuttgart. As the coalition partner of the first traffic light government at the federal level, the Liberals are under particularly close scrutiny this time. Party leader Christian Lindner calls in advance for the “turning point” invoked by the Federal Chancellor to also be introduced in economic and financial policy.

Specifically, Lindner is in favor of domestic fracking, calling for fewer bans, a reduction in bureaucracy and more budgetary discipline. And Transport Minister Volker Wissing has also brought the extension of the nuclear power plant running times beyond the coming spring back into play.

The demands of the two ministers not only show how far removed the FDP is from the red-green partners. In many points, the positioning also means a distancing from the economic course that the party itself supported in the past year of crisis.

After the conclusion of the coalition agreement, Lindner was still considered the big winner. At the time, his party expected a strong liberal profile, especially from the position of chief treasurer.

But after Russia's attack on Ukraine last spring, the traffic light, like the grand coalition before it, relied on massive government spending and new debt in order to mitigate as much as possible of the consequences of the crisis for citizens and companies.

The three relief packages with popular measures such as the fuel discount, one-off payments for all employees, pensioners and students or the 9-euro ticket were financed by loans.

In addition, Lindner has formed several so-called special funds in order to take on further debts on a gigantic scale. Because the decision to strengthen the Bundeswehr, climate protection and the energy price subsidy requires a total of around 400 billion euros, which the state will provide on credit via the corresponding shadow budgets.

For this purpose, Lindner has had the relevant credit authorizations approved by the Bundestag. The Federal Audit Office, like the Stability Council, has severely criticized this financial management. Only by shifting huge blocks of spending to shadow budgets can the traffic light again comply with the debt brake that has been suspended since the Corona year 2020.

On the credit side, the Minister of Finance can claim that he was able to push through tax relief at the turn of the year. In the case of income tax, the so-called cold progression was compensated. Without this correction, one would slip into increasingly severe taxation due to inflation, even if one had real income losses.

The increase in child benefit and the full deductibility of pension contributions also relieve taxpayers. Only in the case of inheritance tax does the new valuation of real estate based on current market prices in many cases mean a substantial tax increase.

Even more people and companies will be affected by the increase in social security contributions. Because both health insurance and unemployment insurance are becoming more expensive, the social security contribution rate now exceeds the 40 percent mark, which was considered a firewall even in the times of Corona.

In fact, the FDP will hardly be able to prevent the burden from increasing rapidly. Because both the health insurance companies and the long-term care insurance companies are recording high deficits. In addition, the Greens and SPD have also pushed through expensive plans for pensions in the coalition agreement.

Old-age security is a socio-political field in which the dilemma of the FDP in the traffic light coalition becomes clear. It is true that the liberals have made a point with the planned introduction of a share pension. The federal government is giving ten billion euros to stabilize the statutory pension in the long term with a funded pillar.

In return, however, the liberals have to support the fact that red-green fixes the pension level permanently at 48 percent despite demographic change. Compared to the status quo, this measure meant an increasing additional burden for the contributors.

According to the Bundesbank, the younger generation is threatened with a pension contribution rate of 29 percent in the long term. And the Federal Audit Office warns of a petrified federal budget, because without social reforms, the tax subsidy for old-age security will also increase. The effect of stock rent, on the other hand, is negligible given the mini volume.

When it comes to citizen income, which replaced Hartz IV at the turn of the year, the FDP, in cooperation with the CDU and CSU, was able to push through some changes to the original law by Federal Labor Minister Hubertus Heil (SPD). The standard rate rose by 53 euros and more generous rules will apply in the future when it comes to protective assets. But sanctions are still possible from day one.

In terms of immigration policy, the FDP is concentrating on the points that are undisputed: The “opportunity card” propagated by the Liberals should in future allow qualified migrants to come to Germany to look for a job if they have language skills or professional qualifications.

In return for these simplifications, which are also desired by the economy, the Liberals are ready to make significant concessions in terms of faster naturalization. Rejected asylum seekers should also be able to remain more easily in the future.

Despite the “opportunity card”, this package hardly gets any closer to the goal of controlled immigration proclaimed by the FDP. The FDP does not even take up the demand from employers to abolish the popular early retirement ("retirement at 63") in view of the shortage of skilled workers.

All the more controversy within the coalition threatens on the question of how the structural change towards a green and digital future is to be accompanied and promoted. In an interview with the Börsen-Zeitung, Lindner calls for "restraint in interventions, bureaucratic shackles and prohibition ideas". That would mean a change of course. Because with the new supply chain law, the excess profit tax or the accelerated phase-out of coal, the traffic light has so far been moving in the opposite direction.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 5 a.m. with the financial journalists from WELT. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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