BERLIN – Chancellor Olaf Scholz said on Wednesday his ruling coalition would try to present new budget plans to parliament “very quickly” after a Constitutional Court ruling last week plunged his government and its finances into chaos.
The chancellor is facing mounting criticism for still failing to come up with a proposal on how to close Germany’s gaping budget deficit – a week after the court ruling left a €60 billion hole in the books.
It is an accounting mess that now casts doubt on future payments for energy, the green transition in industry and the production of microchips.
Crucially, last week’s ruling means not just a delay in next year’s budget – which was made clear on Wednesday when a parliamentary committee postponed a preliminary adoption of spending plans for 2024 – but also potentially an additional “emergency budget” for this one year could require the consequences of the court decision.
At a press conference with Italian Prime Minister Giorgia Meloni in Berlin, Scholz avoided details about how to proceed and argued that the consequences of the ruling still had to be “very carefully examined,” which now had to be done “very quickly and promptly.”
The Social Democratic chancellor argued that his three-party coalition, which also includes the Greens and the FDP, is determined to push forward new budget plans “very quickly” and “ensure that what we have set out to do” is implemented “For the good cohesion in Germany, for the further development of our welfare state, for the modernization of our economy – we can actually make further progress.”
Still, he did not say where he might make the spending cuts that appear necessary to make that happen.
Scholz had already expressed optimism on Tuesday that Germany could continue to pay subsidies to chip manufacturers Intel and TSMC for the construction of new plants in eastern Germany despite budget cuts.
A key consequence of last week’s ruling is that it is likely to limit the ability of German leaders at both federal and state levels to use money from various special funds set up to circumvent the debt brake. This mechanism limits the federal deficit to 0.35 percent of GDP, except in times of emergency.
At a budget committee hearing on Tuesday, several legal experts argued that the Scholz government must present an additional “emergency budget” for this year to cover more than 30 billion euros in spending on energy subsidies. These grants were financed through a special fund outside the regular budget – a practice that is likely illegal given last week’s ruling.
Controversially, such a decision would likely require the debt brake to be suspended for this year.
In response to a question from POLITICO on Tuesday evening in Berlin, Federal Finance Minister Christian Lindner, who has expressed great pride in maintaining the debt brake in the past, refrained from giving a clear answer about a possible easing of debt rules this year.
Lindner also argued that the 2024 budget will be “a little less moderate and a little more restrictive.”