Why Germany's government can't agree on debt rules

Some in Olaf Scholz' cabinet want to take on big new debts to pay for climate policies. Others see debt as a danger to German wealth.

Photo by Steve Smith on Unsplash

Dear Reader,

One of Olaf Scholz’ final acts as finance minister in Angela Merkel’s last government came after the 2021 election had already been held. 

In October 2021, he decided to move €60 billion of unused funds from an emergency budget established to tackle the fallout of the pandemic into a fund for managing the transition to “green” technologies.

Scholz had just scored a narrow victory over the CDU at the national election, winning 26 percent of the vote to 24 percent for the conservative party. 

The win was hardly overwhelming. To secure his place in history among the likes of Konrad Adenauer and Willy Brandt, Scholz would need to knit together a unique three-way coalition involving his Social Democrats (SPD), the Greens and the Free Democrats (FDP).

But the three parties had very different agendas.

The Greens wanted to plough public money into a radical overhaul of the energy system, while the SPD planned to push up welfare payments and cling on to …