BERLIN, (Reuters) – Germany’s federal government finances in a serious state. The next government must consolidate these funds.

After agreeing in exploratory negotiations to return to debt limits by 2023, and to avoid any tax increases, Social Democrats (SPD), Greens the eco-friendly party and Free Democrats (FDP), from the centre left face an enormous spending problem.

According to sources familiar with talks between the parties, they discussed raising federal borrowing for next year in order to fund a multi-billion euro injection into the government’s climate investment fund.

In a report to the Bundestag, the lower house of Parliament, the federal auditor office warned against any fiscal excesses.

The situation is grave. The office stated that a federal new government is needed to make federal finances more sustainable. Federal finances are in an extremely critical situation.

It stated that “Waiting for economic recovery will not suffice to bring financial stability back”

The government’s economic advisors, who guide the setting of fiscal policy through forecasts, have reduced its 2021 growth prediction for Europe’s largest economy, according to a report released Wednesday.

The 2.7% increase in growth they forecast for 2021 is down from 3.1% in March. This was due to global supply chain bottlenecks, capacity limitations, and other factors.

Berlin is facing a number of financial problems that have not been solved, according to the office. These include the struggle against climate change, ageing society and risk of rising interest rates.

Commissioner for Administrative Efficiency at the office recommended “a moratorium of expenditure” which means that any new measure must be counterfinanced through the cancellation of existing measures.

Three parties are holding talks on coalition to form a government.