FILE PHOTO: German Economic Minister Robert Habeck hosts the 2nd European summit for bidirectional charging in Berlin, Germany, October 23, 2024. REUTERS/Liesa Johannssen/File Photo
BERLIN (Reuters) - The party leaders of Germany's increasingly loveless coalition met for more crisis talks on Tuesday but a budgetary compromise that could avert the collapse of Chancellor Olaf Scholz's government still looked elusive.
The ideologically inchoate alliance was thrown into disarray when Finance Minister Christian Lindner's neo-liberal Free Democrats, the smallest coalition party, surprised their left-wing partners with proposals to revive the economy with public spending cuts, lower taxes and a bonfire of regulations.
A compromise floated by Economy Minister Robert Habeck of the Greens party on Monday, under which he would hand back to the treasury 10 billion euros freed up by the collapse of a scheme to bring an Intel chip factory to Germany, was batted away on Tuesday by Lindner's close party ally Katja Hessel.
The turmoil has set in at a time when Europe's largest economy could face a second successive year of contraction, with businesses fearing a loss of competitiveness and far-right and far-left parties gaining popularity.
"It's not about plugging budget gaps or a few tens of billions here or there," Hessel, a junior minister, wrote on social media. "It should be about how we strengthen growth in Germany."
Among the proposals the FDP made in its paper - which the party initially said had been disclosed by accident - was one to delay by five years the target date for meeting some climate protection goals - anathema to the environmentalist Greens.
Habeck said on Monday it was crucial, especially at a time of global instability and with the U.S. about to elect a new president, that Germany had a stable government and that he did not wish to break up the coalition.
"This coalition won't ever be a love affair," he added.
Both Scholz's Social Democrats and the Greens believe in a more interventionist economic policy.
Germany's biggest-selling newspaper Bild published photos of Lindner and Habeck arriving separately at Scholz's riverside office shortly after dawn, with Lindner seen posing for a photo outside his limousine before the two left some two hours later.
Scholz's government has been plagued by budgetary woes ever since the Constitutional Court last year struck down a 60-billion-euro accounting manoeuvre that had helped paper over gaps in the three parties' approach to fiscal policy.
A coalition collapse would initially lead to a minority government led by Scholz, who could either try to govern until elections scheduled for next September, relying on ad hoc parliamentary majorities to pass laws, or seek an early vote.
(Writing by Thomas Escritt; editing by Matthias Williams and Mark Heinrich)
