Piwarz warns: Taking on new debt must not become the norm

Saxony’s Finance Minister Christian Piwarz (CDU) does not view new borrowing as a lifeline for sound public finances. The minister told the German Press Agency that the lifeline was thrown out in the current two-year budget solely to stay afloat and buy time. 

It may be necessary to consider this again in the 2029/2030 budget if there is no significant economic growth by then. “But by then at the latest, this must come to an end, because otherwise we will indeed face a problem with intergenerational justice.”

Borrowing of just under 1.5 billion euros for 2027 and 2028

The CDU-SPD minority government in Saxony can only close the funding gap in the current budget by factoring in borrowing totaling just under 1.5 billion euros for both fiscal years. About half of the amount is to go to the municipalities. An amendment to the Basic Law allowed the federal states to take on new debt amounting to 0.35 percent of gross domestic product. For Saxony, that amounts to about 728 million euros per year. Piwarz had repeatedly made it clear that taking on new debt should not be a permanent solution.

Finance Minister Sees Saxony in a Transitional Phase

The minister speaks of a classic transitional phase. “We still have a structural deficit of 1.4 to 1.5 billion euros per year. The question is whether we can eliminate this through our reform efforts.” In the long run, this deficit must be eliminated. However, making such cuts all at once would be so severe that society would not be able to withstand them. In any case, the state can only make cuts to discretionary services. But that would be immediately felt by every citizen. “Nevertheless, we must restructure. In the long run, we won’t be able to afford this.”

Not all measures will take effect immediately

According to Piwarz, there is also a time component to the necessary savings: What is being planned now will not take effect immediately in every case. As an example, he cited the staff reductions in the state administration that have now begun: Only in the final phase will these yield savings of approximately 600 million euros per year. According to the government’s plans, approximately 8,700 positions—out of the current total of just under 88,500—are to be eliminated by 2040. The government intends to use the coming years to review government functions and services, adjust structures, and reduce bureaucracy.

Piwarz: State Parliamentary Factions in a Phase of Self-Discovery

In the finance minister’s view, all parliamentary factions in the state legislature are in a phase of self-discovery with regard to the budget. “There are different approaches. By the end of this month, it will be clear with which partners we will secure a majority for the budget.” During negotiations on the previous budget, time constraints led to parallel negotiations with the Sahra Wagenknecht Alliance, the Greens, and the Left Party. That is expected to be different this time. “At the moment, we are still on schedule. Before the fall break, it should be clear with whom we will be negotiating.”

The Saxon government plans to spend approximately 53.5 billion euros over the next two years. This makes the total budget larger than ever before. However, Piwarz is deliberately avoiding referring to it as a record budget. That’s because, despite the large figures, the budget is accompanied by cuts and reductions.