The newspaper Bild, true to its style, describes it as if the end of the coalition government under Olaf Solz is imminent. “SPD revolt against Solz. 30 MPs threaten to leave the coalition. The revolt could lead to an unprecedented government crisis and spell the end of the coalition,” its columnist describes the situation. This is an old issue, but it is constantly raised as an obstacle to the drawing up of yet another crucial budget for 2025. The rule of the balanced budget, which has been mandated by the German Constitution for 15 years, allowing only 0 percent debt, should be observed. 35% of GDP?

“The doctrine of zero deficits means immobility”

This time the canvas is different, because the debate takes place in the light of the electoral results of the European elections, the only ones in pan-German scope that showed a “shadow” coalition government of itself. With the Social Democrats having achieved their worst ever election result, the Greens having suffered a real slump with a loss of 8% of their strength compared to 5 years ago, and Finance Minister Christian Lindner’s Liberals, guardian of fiscal “virtue”, to save her in the hair. All three parties fear that in the next parliamentary elections next year, their political deterioration will take on greater dimensions, with far-right and ethno-populist forces winning.

But there is also the ailing German economy, which is expected to contract by 0.3 percent this year, according to a forecast by the Hans Blecker Foundation’s Institute for Macroeconomics and Business Research, which is close to the unions. And this is due to, among other factors, the strict fiscal policy of the government. So the “rebellion” when reading Bild was perhaps expected and was manifested by all wings of the K.O. of the SPD against Olaf Solz himself. In a joint announcement, they request that the exceptions provided for in the Constitution be invoked and a state of emergency be declared, so that the country can resort to borrowing. “The doctrine of zero deficits means immobility and economic irrationality,” said a statement by Seeheimer Kreis, a working group of the party’s parliamentarians who favor a realist policy, Netzwerk Berlin, a network of progressive Social Democratic parliamentarians, and the party’s left wing.

“Due to the emergency situation in Ukraine and the floods we will have to make use of the debt brake exception this year as well,” the statement said. What they are calling for is new scope for “special investment” to boost Germany’s competitiveness as a place to set up businesses, adequate government funding for security and social spending, and reform of the debt brake so that the state can generally be more flexible in taking on debt

Upholding the Constitution or dissolving the coalition?

The pressure on Christian Lindner and the chancellor himself is intensifying. Only on Sunday, in the summer interview on the first channel of the German public television ARD against the background of the sunny Bundestag, Solz supported his minister. “We have to make do with the money we have. There’s no way we can avoid that,” he said in a tone that was beyond question. In the SPD caucus they are now not ruling out a split of the coalition, in case Lindner withdraws his policy and insists on saving 25 to 30 billion euros.

The General Secretary of the FDP, Bijan Tzir-Sarai, immediately spoke of the “populism of the Social Democrats” rejecting the social democratic claims after disgust. “A borrowing policy would hurt Germany because of rising interest rates and inflation. Calls for an emergency are currently inflationary,” he said. Observers diagnose irritation in the ranks of the Liberals. “The Constitution overrides the wishful thinking of the Social Democrats,” said Christoph Meier, K.O.’s number two. And threw down the gauntlet. “The SPD must decide whether to uphold the Constitution or dissolve the coalition.” The middle path was chosen by the head of the Federation of German Industries (BDI), Siegfried Rösswurm. He called for significantly more public investment while maintaining the debt brake.

“We are not asking for additional government spending,” he said yesterday, Industry Day, in Berlin. “Instead, we need structural reforms, digital governance and ‘the courage to make uncomfortable and painful decisions’ when prioritizing budget funds.” The “restless” chancellor is nevertheless confident that the government will be able to table a joint budget plan in July with the aim of the cabinet on July 3, but revised it to July 17. How this will be done without one side or the other backing down is hard to predict. One idea being read in many reports is the possibility of giving the FDP something in return that is “painful” to the SPD, such as scrapping the solidarity levy even for high earners and businesses, in order to give a new economic boost. In the end, what is preferable: the fiscal “race”, or a military victory for Ukraine?