Greens accuse Merkel of 'voodoo fiscal policy', want new debt for climate plan

[August 12, 2019]  BERLIN (Reuters) - The leader of Germany's surging Greens party, a likely coalition partner in any new government, raised the pressure on Chancellor Angela Merkel's conservatives on Monday to ditch their balanced budget goal and finance a climate protection plan with new debt.

The call by Robert Habeck comes after a senior government official told Reuters last week that the finance ministry, led by the center-left Social Democrats (SPD), is considering the issuance of new debt to help finance a costly climate protection program that Berlin wants to seal next month.

"The insistence on the 'black zero' (a balanced budget) is voodoo fiscal policy," Habeck told Deutschlandfunk radio, adding that Merkel's Christian Democrats (CDU) should overcome their reluctance to finance additional public spending with new debt.

"We'll need massive investments in climate protection," Habeck said, pointing to an already tight federal budget and little fiscal room for maneuver in the light of a slowing economy and sluggish tax revenues.

Annegret Kramp-Karrenbauer, CDU leader and new defense minister in Merkel's cabinet, said on Sunday evening that she was in favor of sticking to the balanced budget goal.

"I think it would be wrong if we now said that we put aside the principle of the 'black zero'," she said.

Since 2014, Merkel's government has managed to raise public spending without incurring new debt thanks to an unusually long growth cycle, record-high employment, buoyant tax revenues and the European Central Bank's bond-buying plan.

GREEN SURGE

But as Germany's borrowing costs sink to new lows almost daily and its economy stalls amid weaker global demand and bruising trade disputes, the government is facing ever louder domestic and international calls to provide extra fiscal stimulus by running a small deficit again.

Germany's Greens party leader Robert Habeck addresses a news conference after the EU election in Berlin, Germany May 27, 2019. REUTERS/Annegret Hilse/File Photo

Germany's Greens have surged in opinion polls over the past few months and are now breathing down the neck of Merkel's conservatives.

In a Forsa poll published on Monday, Merkel's conservative CDU/CSU bloc fell one percentage point to 26% while the Greens rose two points to 25%.

Through their electoral success in many federal states and the Bundesrat upper chamber of parliament, the Greens already have a major say in passing laws.

"We're actually already an almost governing party in the waiting," Habeck told Deutschlandfunk.

The SPD, which has seen its support crumble during its period as Merkel's junior coalition partner, is now weighing whether to quit the government.

On the basis of current opinion polls, the Greens would be the only possible alternative partner for Merkel's conservatives as they have ruled out any tie-up with the far-right Alternative for Germany (AfD) or the far-left Linke. The conservatives' traditional coalition partner, the pro-business FDP, is not strong enough in parliament.

(Reporting by Michael Nienaber; Editing by Gareth Jones)

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