Gov't Agrees On Plugging Budget Gap, But Coalition Tensions Remain

Gov't spox Steffen Hebestreit confirms the coalition has agreed on plans to narrow the EUR17bn gap in the 2025 federal budget. This should allow for the budget's submission to parliament later today. The draft budget was approved by the coalition in July after lengthy negotiations, despite the lack of resolution to the budget gap.

• This agreement does little to resolve internal coalition divisions. As Politico reports, some policy stances being taken by the smallest coalition member, the pro-business liberal Free Democrats (FDP), would appear to be tailor-made to antagonise the two other parties, Chancellor Olaf Scholz's centre-left Social Democrats and the environmentalist Greens.
• In recent weeks senior FDP figures including party head, Finance Minister Christian Lindner, have advocated for policies aiding drivers at the expense of cyclists, cutting welfare, and abolishing the foreign aid dep't.
• For the FDP the situation appears bleak as it struggles to rise above 5% support in nationwide polls, putting it right on the threshold to win seats in the Bundestag.
• Next month's state elections in Brandenburg, Saxony and Thuringia look set to deliver a harsh rebuke to the governing parties. In the latter two states, the combined vote share for the coalition could come in below 15%. Nationalist parties both of the right - AfD - and left - Sara Wagenknecht Alliance - are set to make significant gains, which could complicate gov't formation post-election.
• A poor set of results, combined with the more aggressive FDP policy stance, could see further strain put on coalition unity.