German Chancellor Olaf Scholz takes part in the SPD's party conference at the Berlin Exhibition Center, in Berlin, Dec 8, 2023. (PHOTO / AP)

BERLIN/FRANKFURT - German Chancellor Olaf Scholz said on Saturday he was confident that tough talks with coalition partners to fix the country's budget following a landmark court ruling would eventually result in a deal.

Speaking at the Social Democrats (SPD) party conference, Scholz said there would be no cuts to the welfare state, an area where Finance Minister Christian Lindner from the fiscally conservative Free Democratic Party (FDP) has called for reform.

Scholz's governing alliance, which also comprises the Greens, is reeling from the ruling by the constitutional court last month that has torn a 60-billion-euro ($65 billion) hole in its finances and forced it to suspend a constitutionally enshrined "debt brake" for the 2023 budget

"It is a very difficult task," Scholz told party delegates in reference to the ongoing budget talks.

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"But I would like to take this opportunity to convey the confidence that we will succeed. And that we will succeed in a way that is important for the future of this country," he added.

Scholz's governing alliance, which also comprises the Greens, is reeling from the ruling by the constitutional court last month that has torn a 60-billion-euro ($65 billion) hole in its finances and forced it to suspend a constitutionally enshrined "debt brake" for the 2023 budget.

Ongoing talks are focused on whether a debt brake suspension is also possible for next year to plug a 17-billion-euro budget gap, leaving spending on industrial projects, climate policy and welfare up in the air.

A day earlier, the SPD agreed the need for a reform in the medium term of the country's self-imposed borrowing limits to give the state more room for manoeuver.

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Scholz, whose public ratings fell to a record low in a recent survey by broadcaster ARD, said that budget negotiations were no "insurmountable task" but required a common understanding across the three-way coalition.

"But it is very clear to me that there will be no dismantling of the welfare state in Germany in a situation like this," he said.