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Germany's Finance Ministry has become a battleground

October 24, 2021

With three-way coalition talks for Germany's next government underway, the role of finance minister is in high demand. Christian Lindner of the FDP and the Greens' Robert Habeck both want the job. How important is it?

Robert Habeck and Christian Lindner
Green Party co-chair Robert Habeck (left) and FDP chairman Christian Lindner both have eyes on the Finance MinistryImage: Michael Kappeler/dpa/picture alliance

Germany is one step closer to a new government. Official coalition talks have begun between the center-left Social Democrats (SPD), the environmentalist Greens and the neoliberal Free Democrats (FDP). The parties have said the talks will last until at least the end of November, and the question of how portfolios and ministries will be divided up will only be answered at the very end.

It may come as no surprise that the Greens and FDP are fighting over the key post of finance minister.

"It's the most influential role apart from the chancellor," explained Uwe Jun, a Trier-based political scientist and party researcher. That's because the finance minister submits the budget and "policy-making has a lot to do with financial resources," he added.

Even if it is parliament that ultimately chooses whether to adopt a budget, the preliminary planning is done in the Finance Ministry. In the ministry, a huge building on Berlin's Wilhelmstrasse with more than 2,000 staff, they look closely at the financial requirements of all government departments and draw up the budget together with them.

The Finance Ministry in Berlin's government district
The Finance Ministry in Berlin's government district is one of the city's largest office buildingsImage: picture alliance/Arco Images

As such, the two finance ministers of the last 12 years, Wolfgang Schäuble of the conservative Christian Democrats (CDU) and Olaf Scholz (SPD) have exerted "considerable influence," Jun told DW. Scholz is now likely to be Germany's next chancellor.

Hans Eichel from the SPD was finance minister from 1999 to 2005. He told German radio station Deutschlandfunk that he felt "strong" in the role — but added that for a government to be successful, collegial cooperation is more important than strong ministers. 

Right of veto

The finance minister can veto all other ministers in the Cabinet. However, this is a "blunted sword," said Eichel. The veto can be overruled by a simple majority, so if the finance minister does not get his way, he or she would not emerge strengthened but weakened. 

Political scientist Jun believes it's better for a finance minister to build mutual trust and look for solutions together, instead of confronting other ministers.

The finance minister also carries weight on the international stage. Former minister Eichel called the Finance Ministry "the real European ministry."

"No group in Brussels is as influential as ECOFIN, the EU's Economic and Financial Affairs Council," he said.

Jun agrees, pointing to former Finance Minister Schäuble, who always insisted on compliance with the EU Stability and Growth Pact, and Scholz, who used his influence in EU decision-making during the coronavirus crisis

Additionally, the finance minister represents Germany at the Eurogroup, which steers the monetary union, and on a global level at the G20, a group of the world's most powerful economies formed in 1999.

Government experience trumps financial expertise

The last five finance ministers had all held significant positions before their appointments. Four of them were state premiers, and Schäuble had previously been federal interior minister.

Eichel said it's not necessary for the minister himself to be a finance specialist as "the good experts are all in the ministry." The minister's role is instead to lead them to good decisions.

Neither Christian Lindner of the FDP nor the Greens' Robert Habeck have studied economics. Lindner has no ministerial experience, but Habeck has governed at state level — he was deputy premier and headed the Environment Ministry in the northern state of Schleswig-Holstein for six years.

It's an advantage for a finance minister to understand government departmental coordination "from the inside," said Jun, because the Finance Ministry has to coordinate a great deal. In Lindner's case, his personal experience in these matters is "rather thin," he added.

Jun also pointed out that the Greens, for example, are worried about whether they would be able to implement their climate protection goals with Lindner as become finance minister. The FDP's priorities are market-based instruments and incentives for technological solutions, while the Greens are more inclined to state regulation and direct government funding. 

For the FDP, Jun said, this post is particularly important because financial and economic policy is at the party's core.

Fearing a loss of face

Current Finance Minister Scholz scored points in the coronavirus crisis and after the flood disaster in the summer with promises of aid for companies and those affected. Now he is in line to become chancellor. 

"Scholz benefited from the fact that the federal budget situation was very good," said Jun. "But it's also possible that the budget situation will deteriorate significantly and a finance minister will have to make significant cuts." If unpleasant decisions are made, Scholz's reputation could wane. 

But Jun does not expect the coalition to fail because of the dispute over the Finance Ministry. The SPD, FDP and Greens have all told the public that they want a coalition of new beginnings and have spoken of trust and a high level of willingness. 

Jun said if they now failed in the allocation of posts, "all parties involved would lose face."

This article has been translated from German

While you're here: Every Tuesday, DW editors round up what is happening in German politics and society, with an eye toward understanding this year's elections and beyond. You can sign up here for the weekly email newsletter Berlin Briefing, to stay on top of developments as Germany enters the post-Merkel era.

Andrea Grunau
Andrea Grunau Reporter and author