Why Germany’s finance ministry has become a battleground

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 say 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,” Trier-based political scientist and party researcher Uwe Jun explained to DW. That’s because the finance minister submits the budget and “policy-making has a lot to do with financial resources,” Jun 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 employees, they look closely at the financial requirements of all government departments and draw up the budget together with them.

The Federal Ministry of Finance in Berlin’s government district is one of the city’s largest office buildings

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,” according to Uwe Jun. 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 broadcaster 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,” according to Eichel. The veto can be overruled by a simple majority, so if the finance minister does not get his way, he would not emerge strengthened but weakened. 

Political scientist Jun believes it is 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 internationally. Former minister Hans 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. Additionally, the finance minister represents Germany at the Euro Group, 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.

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

Government experience trumps financial expertise

The last five finance ministers had all held large roles before their appointments. Four of them had been state premiers and Wolfgang Schäuble had previously been a federal interior minister.

Hans Eichel said that it is 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 nor Robert Habeck studied economics. Lindner has no ministerial experience but Habeck has experience at a state level: he was deputy premier and headed the environment ministry in the northern state of Schleswig-Holstein for six years.

It is an advantage for a finance minister to understand government departmental coordination “from the inside,” believes Uwe Jun, because the finance ministry has to coordinate a great deal. In Lindner’s case, his personal experience in these matters is  “rather thin,” Jun added.

Jun can also understand that the Greens, for example, are worried about whether they would be able to implement their climate protection goals if Christian Lindner became 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 Olaf 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,” Uwe Jun said. “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 wanted a coalition of new beginnings and had 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.

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