No Free Ride

Finance Chief Schäuble, Germany's Dr. No

Schäuble Bundestag 10Sept14 Reuters
German Finance Minister Wolfgang Schaeuble speaks during the budget debate in the Bundestag in Berlin.
  • Why it matters

    Why it matters

    The reputation of German Chancellor Angela Merkel could be tarnished should her finance minister be unable to deliver on his promise of a balanced budget by 2015.

  • Facts


    • Mr. Schäuble said additional state spending would undermine confidence in the euro currency zone.
    • Experts see a potential €3.5 billion budget shortfall amid lower tax collections and increased spending on personnel and other items.
    • The Geman coalition government is anticipating a budget gap of roughly €1.5 billion, but is looking for ways to save money.
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Nothing can shake German Finance Minister Wolfgang Schäuble’s dream of a debt-free budget. The conflict in Ukraine? The economic crisis in Europe? The member of the center-right Christian Democratic Union doesn’t see these flashpoints as obstacles, but rather incentives to remain firmly committed to the nation’s austerity policies.

“Anything else would lead to a new crisis of confidence,” Mr. Schäuble said. “And that would be the last thing we need in Europe.”

Yet the budget debates Tuesday in the German Parliament centered primarily on one question: Will Mr. Schäuble, like so many finance ministers before him, fall just short of his goal and be forced to run up new debts in the coming year?

One thing is certain: The risks for Mr. Schäuble are growing.

Calculations made for Handelsblatt by the Kiel Institute for the World Economy, an economic research center and think tank known by its German acronym IfW, predict that without additional cuts to the federal budget, there will be a gaping hole of €3.5 billion ($4.53 billion). The IfW projections differ from those of the finance minister because they are based on fewer tax revenues and increased spending on items such as personnel.

“If the federal state is again forced to refund the nuclear fuel rod tax, the hole would even be proportionally larger,” said Alfred Boss, director of public finance at IfW.

Earlier this year a Hamburg court ruled that a nuclear fuel rod tax imposed on Germany’s power suppliers has to be reimbursed until its compatibility with E.U. and domestic law is established. The reimbursement amounts to €2.2 billion.

The budget introduced by Mr. Schäuble sees income and expenditures balancing out at €299.5 billion each. If this projection comes true, it would be a historic achievement — the first balanced budget since 1970 without increased borrowing. And it would certainly burnish the reputation of Mr. Schäuble, who is credited with helping save the euro, as among Germany’s greatest finance ministers.

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