German government reaches child allowance compromise

Germany's government announced early on Monday that it had made a breakthrough on a new child allowance plan, after weeks of arguing primarily between Family Minister Lisa Paus, of the Green party, and Finance Minister Christian Lindner, of the Free Democrats. 

Lindner and Paus appeared at a press conference later in the day offering more details, along with Labor Minister Hubertus Heil. 

What was said about the compromise? 

"After decades of political discussions, it's this federal government that's found an answer to child allowance payments. And we can be proud of that," Paus said, thanking Chancellor Olaf Scholz for taking part in the talks and thanking Lindner for the "constructive talks."

"They were at times really tough talks, in order to reach a positive conclusion in the matter. But it paid off," Paus said.

She described the deal reached as "the most comprehensive social policy reform in many years" and called child allowance payments "the central answer to combating child poverty effectively." 

The new accord will aim to set aside roughly €2.4 billion (roughly $2.6 billion) extra per year starting in 2025, a far smaller increase than Paus had originally lobbied for. However, that figure is also set to rise in the subsequent years.

Like Paus, Lindner described the talks as "constructive," but also "intensive." However, he said this was also a result of the "complexity of the material," and "not at all solely because of controversies." 

The FDP leader called the deal a "central reform intention of this legislative period in social policy," saying the compromise meant delivering on a coalition agreement pledge.

Lindner said one issue the government's plan wanted to tackle was working parents struggling financially, who were eligible for child allowance payments, but who were not claiming it, presumably unaware they could. 

Another major change would be for single parents. Currently, a single parent's salary is counted in its entirety when working out whether they are eligible for assistance. In the future, Lindner said, this would be partial and on a sliding scale — from 75% of their salary if a high-earner to 45% if a relatively low earner.

Lengthy dispute led to emergency talks chaired by Scholz

Paus and Lindner had been disputing how much extra money should be set aside for months, with Paus seeking far larger sums — particularly for lower-income families — and Lindner saying only limited funds were available. 

Their dispute had also spilled over into other policy areas, with Paus earlier this month blocking Lindner's so-called "growth opportunities law" bill that includes multiple tax breaks for businesses.

Chancellor Scholz last week held several sets of talks with the ministers — most recently on Sunday — seeking to break the latest policy- and money-related deadlock for his coalition. 

Lindner has argued in recent months that several policy pledges that were part of the coalition deal forged after 2021's election — before Russia's invasion of Ukraine and sharp rises in inflation and interest put additional and unexpected pressures on Berlin's coffers — can no longer be funded as easily as was anticipated almost two years ago. 

Similar policy disputes within the coalition in recent months have included the details of a law trying to phase out oil and gas home heating, how much the federal government should help local authorities financially with asylum seekers, and whether and by how much to subsidize energy prices for heavy industry. 

Germany's birth rates have been comparatively low even by the standards of developed countries for decades and successive governments have sought progress in several policy areas, for instance expanding daycare provision, to try to encourage more prospective parents.

msh/ab (AFP, dpa, epd, KNA)

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