His tetchiness is understandable. Schäuble this autumn is on the defensive to an extent not seen in some time. During his appearance on the panel, he faced repeated demands from other speakers, including Italian Finance Minister Pier Carlo Padoan and former US Treasury Secretary Larry Summers, for Germany to take action to spark economic growth in Europe. He sought to counteract them with his usual mantra, according to which Germany remains the motor driving the entire European economy.
The problem, though, is that Europe's motor is losing steam, with a slew of bad news about the German economy in recent weeks. The latest business climate index published by the respected Munich economic think tank Ifo, which is considered to be a reliable early indicator, fell for the fifth straight month in September to its lowest level in almost a year and a half. Furthermore, German factory orders are down and exports are collapsing. And last week, the country's leading economic research institutes issued downward revisions of their economic forecasts for this year and next.
The German government on Tuesday followed suit. Economics Minister Sigmar Gabriel in Berlin announced that growth is now expected to be 1.2 percent in 2014 and 1.3 percent in 2015. Previously, the government had forecast 1.8 percent growth this year and 2.0 percent in 2015.
The course correction has created a dilemma for Schäuble. His draft federal budget for 2015 is based on the higher growth predictions. A conservative with Chancellor Angela Merkel's conservative Christian Democratic Union (CDU), Schäuble is hoping to become the first finance minister since 1969 to present a balanced budget free of new debt. Indeed, it has become Schäuble's ultimate career goal. But weakening growth translates to lower tax revenues and the finance minister's dream may now be washed away in a flood of red ink.
The rule of thumb in Germany holds that growth loss of half a percentage point leads to a shortfall in the federal budget of around €4 billion ($5.07 billion), half of which must be absorbed by the government. "It's always possible to drum up €2 billion in a budget of €300 billion in order to stay in the black," a sanguine Schäuble confidant says. Beyond that, though, the wiggle room disappears.
Budget for Investment?
At the same time, Schäuble would also like to do more to spur growth if he can do so without jeopardizing his goal of a balanced budget. He wants to restructure the budget, moving away from consumptive expenditures and focusing instead on investment. Given that his draft budget is still the subject of preliminary consultations in German parliament, he still has plenty of time to shift funds around.
Schäuble has hinted to parliamentarians where money might be found. Germany's social security funds are currently operating with large surpluses and they could get by, for a time at least, with reduced allowances from the federal budget. The funding this would free up -- somewhere between a few hundred million euros and a little over €1 billion -- could be invested in road construction.