Christian Lindner (FDP) likes to present himself as a finance minister who always and everywhere thinks about how to keep the citizens’ money together. It doesn’t always have to be about the large billions, it can also just be about how much the operator of the grand hotel in the former guest house of the federal government on the Petersberg near Bonn has to pay to the state in lease.
In view of the general market price trend, the hotel was “leased too cheaply,” the finance minister joked on the red carpet as he waited in front of the stately building for his guests, the other finance ministers and central bank governors of the G7, the group of leading industrialized nations. The hotel high above the Rhine is the only one owned by the federal government.
When US Treasury Secretary Janet Yellen was the last to arrive shortly before 9 a.m., the big issues were discussed behind closed doors: the different roles of central banks and states in combating inflation, the plans for digital central bank money, the envisaged one Climate club with common goals and solidarity with developing countries in the supply of vaccines.
The G-7 representatives exchanged views on this together with scientists; concrete decisions were not planned from the outset. That happened in the afternoon, when it came to stabilizing Ukraine’s state finances – and it was very specifically about money. By billions.
The Ukrainian Prime Minister Denys Schmyhal and his Finance Minister Serhiy Marchenko were also connected. At the meeting in Washington a month ago, both had explained to the finance ministers that their country needed around five billion euros a month to keep the state apparatus running despite the war. There was talk of support for three months, i.e. 15 billion euros.
By the afternoon it was at least clear how much Germany wants to tax: one billion euros. It is about ensuring the ability of the war-torn Ukrainian state to act, said Lindner in a short statement. He left it open whether the G-7 group would actually come up with the targeted 15 billion euros.
It was a good thing that the Budget Committee of the Bundestag met in Berlin at the same time to agree on the last open positions in the 2022 federal budget. Experience has shown that the meeting lasts until the next morning.
The billion euros for Ukraine does not change the known new debt of 139 billion euros this year, there was a sufficiently large buffer in the draft budget – further aid payments should also be possible if necessary, without Lindner having to initiate a supplementary budget in the coming months .
One billion euros can hardly be taken as the announced “strong signal” that Germany wanted to send as the host of this year’s G-7 meetings. The majority of the liquidity assistance will be provided by the United States in an account with the International Monetary Fund: US Treasury Secretary Janet Yellen had already promised 7.5 billion euros in the run-up to the G-7 meeting.
Once again, there are big differences in the aids. The representatives of the federal government regularly praise themselves for providing Ukraine with a great deal of help – Lindner is happy to do so too. Reference is then made to the support that has flowed to Ukraine since the annexation of Crimea. According to Lindner’s ministry, Germany was the “world’s largest bilateral donor to Ukraine” between 2014 and 2021, although not all funds have yet been paid out.
In relation to this year, the balance of billions is different. Numbers from the Ukraine aid tracker of the Kiel Institute for Economic Research (IfW) raise doubts as to whether Germany actually has a reason to present itself as particularly generous.
From the end of January to May 10, Germany provided direct aid amounting to 2.3 billion euros – financial, military and humanitarian support. This puts Germany behind the United States (EUR 42.9 billion), Great Britain (EUR 4.8 billion) and Poland (EUR 2.6 billion). If you look at the absolute amounts, Germany occupies fourth place among the 37 Western countries that have promised aid so far.
However, the picture changes when the aid is compared to a country’s economic strength. According to IfW statistics, Germany then slips down to 14th place. The commitments until May 10th accounted for only 0.06 percent of gross domestic product (GDP).
Estonia (0.8 percent of GDP), Latvia (0.7 percent) and Poland (0.5 percent) are at the forefront in this regard. The United States follows in fourth place. US aid to Ukraine amounts to 0.2 percent of US economic output.
The importance of such rankings should not be underestimated. The fact that the United States has so far mobilized 43 billion euros and all European countries together, despite the geographical proximity to the war zone, just 16 billion euros, should also play a role at least subliminally at meetings like the one on Petersberg. So why should distant Japan contribute a significant amount?
The leading industrial nations are pursuing common interests when looking at the global economy, which is weakening worldwide due to high energy prices and fragile supply chains. It is now a question of combating risks to the economy, said Lindner at the G-7 meeting.
“This affects inflation, but also the lack of recovery after the pandemic,” said the minister. There should be no stagflation, i.e. a phase of low growth rates combined with high inflation.
In the past few weeks, Lindner has made no secret of the fact that he sees the central banks as primarily responsible for combating inflation. ECB President Christine Lagarde should have heard this again not only from Lindner on the Petersberg.
While the US central bank has already reacted to the strong upward trend in interest rates with significant interest rate hikes, the European Central Bank intends to raise interest rates in July at the earliest – and only slightly at that.
At the meeting, Lindner made it clear where he sees the task of politics now: “It’s about taking pressure off prices,” he said. The aim must be to ensure more productivity and a larger range of companies.
In his view, subsidies for consumers are the wrong way to fight inflation, as they tend to stabilize the high price level. That’s why he wants to phase out funding programs for building renovation and purchase bonuses for electric cars sooner rather than later.
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