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The German government has indefinitely suspended a vote on the 2024 national budget as the constitutional crisis over fiscal policy deepens in the euro zone’s largest economy.
Lawmakers from Chancellor Olaf Scholz’s three coalition parties said a vote on Thursday to approve next year’s budget was canceled after the country’s highest court said last week that the government’s plans to allocate 60 billion euros to a climate fund stuck, violating the household rules.
“The [court] has presented us with major challenges,” said the MPs who sit on the Bundestag’s budget committee in a joint statement. “We want to respond to this carefully and draw up a budget plan that takes into account all the arguments in the judgment.”
In a ruling that has implications for hundreds of billions of euros in other spending commitments, the Constitutional Court found that the government’s plans failed to comply with the country’s debt brake, a measure intended to limit deficits to 0.35 percent of gross domestic product.
Citing pressure from the opposition Christian Democrats (CDU), MPs said the budget crisis must now be fully debated by parliamentarians.
The vote, originally scheduled for last Thursday, had previously been suspended for a week.
With the Bundestag closing on December 15, it could be difficult for the government to push through a vote this year – even if it secures an emergency session of Parliament.
If no budget is agreed, automatic spending restrictions will come into force in all federal ministries from January 1st and will remain in place until the budget is finally drawn up.
Last Wednesday, the Karlsruhe judges invalidated plans according to which the government should transfer 60 billion euros in funds earmarked for the pandemic to its Climate and Transformation Fund (KTF). The KTF is a central project of the Scholz coalition and essential to the government’s plans to decarbonize the German economy.
After initially insisting that spending plans were otherwise on track, the government began to unravel this week.
On Monday, Vice Chancellor Robert Habeck of the Green Party warned that a 200 billion euro fund designed to protect consumers and companies from rising energy costs could also be declared unconstitutional.
The following day, the finance ministry of Christian Lindner of the liberal Free Democrats ordered an immediate freeze on all new, non-binding spending plans in a letter to all ministries.
The CDU accuses the government of having caused the crisis itself by agreeing on “off-balance-sheet” financing outside normal budget planning rules. She also accused the coalition of using its majority in the Bundestag to push through measures without corresponding agreement.
“The turning point. . . “This has just become a reality for you,” CDU leader Friedrich Merz told the government last week, pointing to the geopolitical “turning point” that Scholz often cited as justification for major, transformative new spending, including billions of euros in aid to Ukraine. “Everything is no longer possible,” said Merz.
The CDU supports cuts to social security and welfare benefits to cover the costs of reforming the German military and continuing to subsidize industry.
The CDU and its sister party CSU were responsible for the lawsuit before the Karlsruhe court and are considered ardent supporters of the debt brake anchored in the Basic Law.
One way out for the government would be for the Bundestag to declare spending outside the debt brake permissible in connection with an emergency such as the war in Ukraine. Emergency aid was permitted in the early stages of the coronavirus pandemic.