Analysis. With her new budget proposal, the chancellor’s goal is the right balance between stability, growth and social cohesion.

Merkel relies on welfare for her re-election

Angela Merkel’s program includes zero debt, as usual. The welfare program absorbs more than half of the resources. It also includes real funding for the migrant emergency. And a “high-tech investment package” to the economy made in Germany. On July 6, Finance Minister Wolfgang Schäuble signed the report accompanying the “Draft Law on the financial statements of the Bundesrepublik 2017-2020.”

These are not virtual numbers. The accounts are safe. The spending commitments are detailed. The program is developed with the utmost respect of the constraints of the European Union. It provides a clear vision of the government. In short, the identikit of the third Merkel government in the “white semester” that precedes the political vote in 2017. The budget commits the majority of the Grand Coalition with the SPD Sigmar Gabriel (who just came back from a visit to Tehran).

Nearly €20 billion are allocated for the integration of refugees. Another €22.7 billion go to the education sector. And another €2.2 billion were added to the new security package. Not to mention than half of the federal budget will be invested in social programs (€171 billion out of €328.7 billion).

The budget contains the Chancellor’s stratospheric solution to the problems that trouble the Germans. There is an accounting response for every question: the only plan that can work. On paper, the small miracle asked by Merkel to Minister Schäuble can be found, which keeps the diktat on “black-zero” (zero deficit) to fall within the debt-GDP ratio set by the E.U., while at the same time it finds money for refugees, education and safety necessary for the Chancellor’s policy. In addition to the money to revive the key sectors of Made in Germany.

In fact, the Merkel government mortgages the present and the future: “In 2020 the allocation of the Federal Republic will reach €349.2 billion overall,” says Schäuble. He explained the details to the Parliament, reviewing the regular expenditure items and the ones for the revitalization of the system.

“Social spending remains high and represents the largest share of the federal budget, amounting to about 52 percent. Out of every €2 spent by the government, 1 goes in this area,” says the Finance Ministry. The others are for education, the integration of refugees (€19 billion available from Jan. 1) and other strategic priorities.

The transportation sector will receive in 2017 an additional budget of €500 million, on top of the €12.8 foreseen for 2016. “Since the beginning of the legislature, funds grew by 25 percent,” declares Schäuble. He also included €1.3 billion to be added to the €2.7 required for broadband and €17.6 to be allocated to the Ministry of Education and Research (€1.2 billion more than in 2016).

According to the CDU hawk, “Germany remains reliable: We strengthen its future capacity without additional debt. But at the same time, we are investing in research, infrastructure, homeland security and emergency — refugees. The goal is the right balance between stability, growth and social cohesion.” A programmatic synthesis that also contains the economic and financial guidelines of the Executive.

With a balanced budget, the Merkel government is trying to hit the 60 percent target in the debt-GDP ratio set by the E.U. requirements. “This year, it will reach a value below 70 percent,” Schäuble says, for the benefit of Brussels, before focusing on key sectors.

Micro-electronics will get €1.7 billion in 2020. “With this plan, the government supports the digitization of the economy, innovation capacity and international competitiveness.” But Merkel’s Germany, after the scandal of the Volkswagen diesel emissions (25 percent belongs to the Land of Lower Saxony) and focuses on sustainable mobility. Starting from electric vehicles: There are market incentives worth well over €1.6 billion, in addition to €900 million provided in the “Energy and Climate Fund” for the next five years. Around €600 million will be allocated to the domestic automotive industry for the same purpose.

But this is a much lower amount that what is allocated to the armed forces. The official report says: “The defense budget has grown taking into consideration the diverse and changing responsibilities of national protection, the Atlantic Alliance and international missions. In 2017, military spending will increase by €1.7 billion and will rise to €10.2 billion, the total expenditure foreseen by 2020 will be €36.6 billion.”

At the same cost level of the federal police: “The expenditure in this sector has increased significantly: over €2.2 billion compared to the previous financial plan. The budget of the Interior Ministry in 2017 will grow by about €540 million from the current account. This will generate almost 2,000 new jobs.”

Also tax cuts for “poor” families were added to this plan, as well as an increase in housing allowances and disability pension, but, for now, these are under scrutiny. Schäuble plans allows to allocate €15 billion out of the budget in the next legislature. “Basic allowance, child benefit and tax credits for children will be settled during the next report before the debate of the Bundestag on the budget.”

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