Welcome to the Eurointelligence podcast. I'm Wolfgang Munchau and with me this morning,

Susanne Monsenk and Jack Smith. So what are we going to talk about today?

Oh, I was triggered by your story this morning about the new formula, magic formula,

that can be good for the Traffic light coalition as well as for the

Jamaica Coalition.

Yes, this is a fiscal formula proposed by two German economists.

And what made this proposal so interesting is that one of them is on the right and one of them is on the left, just like that coalition will be.

And it is a, you know, I would think the first politically

intelligent contribution to this debate. It's not necessarily the, you know, what's going to

happen. But the big issue in general policy, the reason why we've been skeptical about the

traffic glide coalition is that it is not clear how you will square the FDP's fiscal conservatism,

its refusal to raise taxes, with the SPD's insistence that taxes have to go up,

with the SPD's insistence on redistribution,

and with this green investment plan of approximately 500 billion euros over a period of 10 years.

If you look at the risks that are down the line for the German budget, higher military spending, higher pension subsidies, higher employment subsidies, if you look at all those risks down the line,

it is unlikely that the next fiscal period will see very similar characteristics as the last

10 years, where people benefited from windfall gains that the government put into reserves

and that allowed it to run fiscal surpluses. We were entering a period where the fiscal

side is going to be much more constrained, and therefore one would need to think about how to

square these conflicting demands of the parties, also with a legal necessity of the German

debt break, which is a constitutional mechanism that ensures that the government cannot

run deficits of in excess of 0.3% or 0.35% per annum over the economic cycle. There's a complicated mechanism that ensures how this

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