Nerves are on edge everywhere, in political Berlin as well as in the hotel and, above all, catering industry. At the moment, all funding is on hold, nobody has a plan, let alone a solution. The planned Bundestag session on the final budget has been postponed.
On politics: "Yesterday [Wednesday], the Budget Committee of the German Bundestag held an expert hearing to discuss the implications of the BVG's judgement on the 2021 supplementary budget. As leaders of the traffic light parliamentary groups, we believe it is necessary to carefully consider this judgement when drawing up the budget for 2024. The resolution on the 2024 budget in the German Bundestag will therefore not take place in the coming session week, as previously planned. Our aim is to discuss the budget swiftly but with due care in order to create planning certainty. Other topics will be placed on the agenda of next week's Bundestag session."
The drama in Berlin continues with an identical statement from the leaders of the Ampel parliamentary group on Wednesday afternoon. The extension of the reduced VAT rate in the hospitality industry, which has not yet been implemented, is therefore likely to fall through the cracks.
Public spat between the parliamentary groups
Just how frayed the coalition's nerves are at the moment can be seen very clearly once again in the case of the restaurant tax. Finance Minister Christian Lindner of the FDP [a friend of the catering industry] let it be known via the tabloid newspaper Bild that he was against raising the VAT on schnitzel and pizza from 7% back to 19%: "If all parties had pulled together, a further extension would have been possible. But the SPD and the Greens had other priorities." - "It is a mystery to me why the Finance Minister is suddenly distancing himself from joint decisions on the upcoming budget," explained SPD parliamentary group leader Ralf Mützenich to the astonished public and the liberal coalition partner in Stern magazine. "Fair co-operation looks different. We had also found an amicable solution to the reduction in VAT for the catering industry. Mr Lindner then unilaterally took this topic off the agenda."
Dehoga reacts indignantly
Ingrid Hartges, Managing Director of the federal association Dehoga (German hotel and restaurant association), reacted sharply to what happened after the BVG judgement became known and after the above-mentioned statements by the parliamentary group leaders: "To simply sweep the agreement of the traffic light coalition off the table like that is reflexive, highly unprofessional and disrespectful! Why can't you call in the budget lawyers and act objectively after such a decision? After all, it was only about a one-year extension of the lower VAT rate, not an indefinite cancellation."
The coalition now has bigger concerns than the catering tax, which they originally wanted to relieve with 3.2 billion. Other shadow budgets could also be affected by the court-ordered budget freeze. Originally earmarked for tackling the coronavirus crisis, the planned funding was now to be used for climate protection and modernising the economy. However, the Constitutional Court has refused to do so and the coalition is now pretty much in the clear.
It was an explosive update from political Berlin on Monday evening when it was officially announced that the Federal Ministry of Finance (BMF) has now extended the budget freeze previously imposed on the Climate and Transformation Fund (KTF) to almost the entire federal budget. Insider information from the Ministry of Finance emphasises that this measure is aimed at stopping the commitment appropriations for 2023 in order to avoid advance payments for future years. This decision has far-reaching implications as it affects all ministry budgets.
Last actions and hopes for the hospitality industry
Whether the Minister President of Mecklenburg-Vorpommern, Manuela Schwesig, can succeed in overturning the tax increase in the Bundesrat is currently unclear. She has no sympathy for this decision, the politician said publicly, adding that the hospitality industry has been through difficult times due to the pandemic and is now struggling with high energy and food prices.
According to information from ahgz, the state chambers are due to discuss VAT twice this Friday [today]. According to the Bundesrat's agenda, Bavaria's Minister President Markus Söder will take the floor himself and present the state's motion (printed matter 623/23): "Resolution of the Bundesrat for a permanent reduced VAT rate for restaurant and catering services in the catering industry and extension of the reduced VAT rate to drinks." The topic will be dealt with as agenda item 67. Drinks will also be included, although the reduced VAT rate currently only applies to food in restaurants. "An increase in the VAT rate on restaurant and catering services would be counterproductive and clearly send the wrong signal," the motion states.
Berlin's Senator for Economic Affairs Franziska Giffey is also said to have announced her opposition in the state chamber - together with Brandenburg and Mecklenburg-Western Pomerania. However, it is completely unclear how the federal states will behave during the vote. A motion for a resolution also has no binding effect on the federal government.Dehoga itself fears a mass death of businesses following the decision, as guests are already staying away due to increased costs. The increased VAT would have to be passed on.
An analysis by the information service provider CRIF (as at 17 November 2023) revealed the following figures: 5,069 restaurants, pubs, snack bars and cafés in Germany are considered to be at risk of insolvency. This corresponds to 12.6% of the businesses analysed. On average, there was a 6% increase in the number of catering establishments at risk of insolvency compared to August 2023. In January 2020 - before the coronavirus pandemic - the number of catering businesses at risk of insolvency was 12,662 or 10.7%.
The risk of insolvency in the catering industry is highest in Berlin, the seat of government, where 16.5% or 1,369 of catering businesses are considered at risk of insolvency. However, according to CRIF, the picture is now twofold: the creditworthiness index as a meaningful measure of financial stability in the catering industry has steadily improved since the beginning of 2022.
Dorint supervisory board criticises: All room for manoeuvre now lost
Dirk Iserlohe, owner and Chairman of the Supervisory Board of the Cologne-based Dorint Hotel Group with over 3,500 employees, also commented on the increase in VAT on food in the hospitality industry: "It is extremely regrettable that measures are now to be taken to close budget gaps, which will only have a further inflationary effect and contribute to the destabilisation of an already ailing industry, no, even the economy as a whole. For me as a hotel entrepreneur, the financial leeway for wage increases, the search for service staff, investments in climate change, refurbishment and renovation costs and compensation for general cost increases has unfortunately been lost. The federal government's decision is above all socially problematic, as restaurateurs have only one response to the VAT increase: further price increases! I can just imagine what will happen if a schnitzel soon costs around 30 euros: The guests will stay away," he explained in a press release on Wednesday.
"Furthermore," said Iserlohe, "the opposition - which originally sought an extension - acted strategically incorrectly by submitting a motion in September to extend the reduced tax rate of 7%. The rejection by the traffic light coalition was predictable. It is logical that the traffic light coalition does not vote in favour when the CDU proposes something. And now the current federal government is using the debate about the non-utilisation of the 60 billion euros as a pretext for a decision that has already been made."
The fact that the tourism industry in Germany is only represented by a coordinator for maritime economy and tourism and not by a ministry, which is absolutely necessary, shows its continued low status (see Politics Inside column from 22 September 2023).
Berlin in a state of emergency
The fact is: political Berlin is currently in a state of emergency. One report follows the next, the rumour mill is buzzing. Just a fortnight ago, politicians were in an absolute spending mood, but now they are outdoing each other with savings proposals. Not in their own departments, of course. And those who brought it all about are now running for cover: Chancellor Olaf Scholz, who as Finance Minister laid the foundations for many of these extra coffers, which are nothing more than more debt - but also Finance Minister Christian Lindner, who after all drew up a budget that was not in line with the constitution and failed resoundingly as the guardian of the true FDP doctrine... Lindner is more of an uninvolved commentator from the sidelines than one of those responsible. And last but not least, climate and economy minister Robert Habeck, who is now no longer able to finance the urgently needed green transformation.
Perplexity everywhere. People in Berlin are already wondering whether the traffic light coalition will break up - but what would new elections bring? The FDP would probably be thrown out of parliament and the right-wing parties would move in, in the worst case even as the strongest parliamentary group. To prevent this, it would be better to "muddle through" again. Somehow, at some point. With something half-hearted again, nothing new, nothing innovative.
To make matters worse, on Tuesday of this week the German national football team also lost to Austria this week (0:2). This team failed because of its coach at the top. Just like the country: Scholz has not even made a public appearance or spoken about this political earthquake since the BVG judgement was announced. / Frank Tetzel
