Does debt limits be offset by tax hikes when not offset pledges of debt limits.
Three parties are looking at a coalition pact by end of month, adds states' role, coalition negotiations, BERLIN, Nov 8 - The three parties working to form Germany's next governing coalition can count on windfall tax revenue in coming years to fund promised investments in a more climate- friendly economy, sources familiar with the matter said on Monday.
The centre-led social Democrats SPD, the Greens and the pro-businesses Free Democrats FDP face a huge spending challenge as they agreed in exploratory talks to return to strict debt limits from 2023 and avoid tax increases.
The new tax revenue estimates show added fiscal room for the federal government of up to 10 billion euro per year, possibly a bit more, compared to previous estimates in spring, two informed sources told Reuters, speaking on condition of anonymity.
The federal system of Germany is traditionally in charge of a large chunk of public investments, and the windfall tax revenues will be even higher for the 16 states.
According to sources, the estimates will bring additional room for public spending in the mid double-digit - billion-euros range per year.
The tax revenue estimates will be released on Thursday by the outgoing Finance Minister and the chancellor in waiting Olaf Scholz, when he is expected to comment on the spending priorities of the next coalition government.
The tax windfall is expected to be a result of a stronger than expected economic recovery, especially in 2022, from the pandemic as well as the overall effects of higher inflation.
The three parties are considering different budget tricks in the ongoing coalition negotiations to create more fiscal fire power for Europe's largest economy.
The idea under discussion include higher federal borrowing next year to allow a one-time injection in the government's climate investment fund, delaying the first repayment of coronavirus debt by five years to 2028, and extending the repayment period to three decades, until 2058, until 2058.
The three parties now seeking details of a coalition pact to spur private- sector investment in a carbon- neutral economy are looking into strengthening the role of the German KfW state development bank.
The Federal environment office has urged parties to end state subsidies that have climate-damaged worth up to 65 billion euro a year, such as a reduced tax rate for diesel, tax discounts for company cars and exemptions from energy taxes for industry.
The three parties are expected to present their policy results and unresolved issues to party leaders by Wednesday, which will then try to formulate a coalition agreement by the end of this month.
As part of the horse-trading and coalition wrangling, the parties must also find a compromise deal on who will take control of the powerful finance ministry.
The Greens warned that the negotiations could take more time, as the three parties hope to elect social Democrat Scholz as the new chancellor in the week of December 6.