How Germany plans to slam on its debt brake again

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Good morning. Estonia’s prime minister Kaja Kallas has told me she is concerned that debates over “security commitments” for Ukraine “blur the picture” regarding Kyiv’s prospective membership of Nato, and distract from the need for what she calls “concrete steps” for the country’s accession.

Today, our Berlin bureau chief assesses Germany’s big budget tightening, and my Brussels colleague reveals EU plans to cut back on Europe’s mountain of food waste.

Big squeeze

Over the past three years, Germany abandoned its strict rules on spending to deal with Covid and the energy crisis arising from the Ukraine war. Today marks a belated return to fiscal orthodoxy, writes Guy Chazan.

Context: Weeks of tense negotiations over the 2024 budget stretched unity in Chancellor Olaf Scholz’s three-party coalition to breaking point. Scholz himself had to intervene as cabinet ministers balked at finance minister Christian Lindner’s proposed spending cuts.

Lindner will appear before journalists in Berlin this afternoon to present the result.

A key goal for the fiscally hawkish leader of the Free Democrats (FDP) was to reinstate the Schuldenbremse or “debt brake” — a constitutional cap on new borrowing. In that, Lindner succeeded.

The federal government will take on just €16.6bn of debt next year, compared with €45.6bn this year, €115.4bn in 2022 and a whopping €215.4bn in 2021.

But to get Germany back on to the path of fiscal rectitude, Lindner had to squeeze government spending till the pips squeaked. All the ministries except defence will have to make savings. The health ministry, for example, will see its budget cut by a third.

In view of the Ukraine war, defence was the only ministry whose budget increased, from €50bn to €51.8bn. Finally, Germany will be able to reach Nato’s target for military spending of 2 per cent of GDP. Much of the extra budgetary spending will, however, go towards higher personnel costs arising from a tariff agreement made with unions this year.

Spending is finally coming down after the profligacy of the past few years, but it remains high compared with pre-pandemic levels. In 2019, the year before the Covid crisis, the federal government spent €356bn. That’s 25 per cent less than the €445.7bn planned for 2024.

Chart du jour: Across the Channel

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Eurostar’s first trains from London Waterloo to Paris and Brussels ran in 1994. After taking a hit during the pandemic and a recent merger, the group sees itself on track to recovery — and wants to offer better connections for people in the rest of Europe.

Scraps

Politicians love signing up to ambitious targets to save the planet at glitzy conferences. It is then down to officials to convert them into reality, writes Andy Bounds.

The European Commission will today pledge to cut food waste by 30 per cent between 2020-30, less than previous international commitments, according to draft legislation seen by the FT.

Context: The UN’s Sustainable Development Goals (SDGs) state that signatories will cut food waste in half by 2030. But no region in the world is on track. The EU is at least now updating its respective law to speed up progress.

The legislation, which will be binding once approved by the EU parliament and member states, says countries “shall take the necessary and appropriate measures” to cut food waste by households, shops, restaurants and takeaways by 30 per cent until the end of the decade.

The food processing and manufacturing industry must reduce it by 10 per cent.

“We are setting the EU on a path towards meeting the SDG target, and we are the first region in the world to do so. This proposal will galvanise action in the EU and accelerate our contribution towards the SDGs,” said an EU official.

They added that the target would be reviewed in 2027 and could be set higher. “We have set ambitious but reachable targets that can be adjusted in view of the progress made.”

On average, a person living in the EU throws out about 130kg of food annually. Reducing this by 30 per cent would save a four-person household €400 a year, according to figures by the EU official.

Meanwhile, other environment targets are proving hard to hit. At last year’s biodiversity conference in Montreal, the EU commission pledged to rewild at least 20 per cent of land and sea areas by 2030. But its plan to do so, the Nature Restoration Law, could be rejected by the European parliament next week.

Its flagship “Fit for 55” climate package to cut greenhouse gas emissions by 55 per cent by 2030 and reach net zero in 2050 is also in trouble.

The European Climate Neutrality Observatory, the EU’s scientific advisory group, last month warned that the bloc was not on course to hit its targets.

What to watch today

1. EU commission presents annual report on the rule of law.

2. Sweden’s prime minister Ulf Kristersson visits US president Joe Biden.

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