German Finance Minister Christian Lindner announced that the debt brake anchored in the Basic Law will be lifted again. The German budget crisis is considered historically unique and also has the potential to dismember the traffic light coalition.
The German traffic light coalition wants to use the debt brake exemption this year because of the Karlsruhe budget decision. Finance Minister Christian Lindner (FDP) announced on Thursday in Berlin that he would present a supplementary budget to the cabinet next week in consultation with Chancellor Olaf Scholz (SPD) and Vice Chancellor Robert Habeck (Greens).
A ministry spokeswoman added that the federal government would propose to the Bundestag that it declare an extraordinary emergency. In this way, loans that have already been used this year will later be legally guaranteed.
According to the decision of the Karlsruhe judges, without the protection there would have been a risk of constitutional violation in the 2023 budget. The judges ruled that the federal government was not allowed to reserve emergency loans for later years. According to experts from the Economic Stabilization Fund, that is exactly what the federal government did to reduce energy prices.
This year, 37 billion euros had already been spent by the end of October, with more money expected to be added by the end of the year. In addition, aid will be provided by a fund for flood victims, which was created in 2021 under similar conditions. In total, loans worth around 45 billion euros will be granted on a constitutionally guaranteed basis. “No new debt will be taken on, but rather the funds that have already been used to deal with the crisis will be placed on a secure legal basis,” Lindner’s spokeswoman emphasized.
The minister explained: “I see it is my job to clean the air now.” Only then can we talk about the budget for next year and beyond.
The German Bundestag must decide on an emergency
To use the exception to the debt brake, the Bundestag must decide on an emergency. According to article 115 of the Basic Law, this is provided for “in the event of natural disasters or exceptional emergency situations that are beyond the control of the State and significantly affect the financial situation of the State”. According to experts, to justify such an emergency, the federal government could argue that the consequences of the energy crisis were still noticeable at the beginning of 2023. At a hearing in the Bundestag, the experts made it clear that, in their opinion, this justified another emergency resolution.
The federal budget for the current year must be placed on a constitutionally sound basis in a timely manner through the supplemental budget before the end of the year. However, it is still unclear when the federal budget for next year could be decided. According to the decision of the Federal Constitutional Court, the project must be completely revised.
The traffic light factions SPD, Greens and FDP have therefore canceled the budget resolution planned for next week in the Bundestag. But they haven’t completely given up on closing before the end of the year. The coalition says there is the possibility of shortening deadlines and extraordinary meetings. Scholz said Wednesday night that he expected a quick and very timely conclusion.
60 billion euros are missing from the special fund for climate protection
He also emphasized that the traffic light wanted to maintain its social, climate and economic policy plans. It is still unclear what exactly will happen to the projects that should be financed by the climate and transformation fund. According to the Karlsruhe ruling, 60 billion euros are missing from this special fund for climate protection and the development of a CO2-neutral economy, which had already been firmly planned. The court declared the reallocation of these loans, which were effectively approved to combat Corona, invalid.
The coalition says legally binding spending commitments will still have to be met next year. The fund also earns income from the price of CO2, among other things. But the remaining money will not be enough for all projects. Where cuts are made, prioritized or eliminated altogether is a matter of great debate between the SPD, the Greens and the FDP.
Debt brake design also “dangerous” for the CDU
Economists and politicians from the SPD and the Greens have suggested reforming the debt brake to solve the problem. On Thursday, a CDU prime minister surprisingly called for this. “The debt brake is a good idea in terms of sound finances. However, I think its current design is dangerous,” said Berlin Mayor Kai Wegner on X (formerly Twitter), as well as in an interview with “Stern” magazine. “Because, as I have been saying for a long time, there is a fear that the brake on debt will increasingly become a brake on the future.” In his opinion, loans should be allowed for investments, Wegner said.
CDU party leader Friedrich Merz had already defended the debt brake on the ARD talk show “Maischberger”. “Right now, I don’t see that we need to address the debt brake,” he said. Over the past two years, Germany has planned around half a billion euros in extra-budgetary spending through parallel budgets. But last week the Constitutional Court cast more than just doubt on this system – and unleashed chaos. The German budget crisis is considered historically unique. The German budget crisis has its origins in a German peculiarity: the debt brake. This was designed during the financial crisis in 2009 and is intended to force the government to take on no more than 0.35 percent of economic output in new national debt in a year. However, the government may decide to lift the debt brake in emergencies such as the pandemic. (APA/dpa)