Source: AFP
Germany will seek to suspend its constitutional debt limit for a fourth straight year, its finance minister said on Thursday, after a shock court ruling derailed government spending plans and sparked a budget crisis.
“The federal government will present a supplementary budget to constitutionally secure the spending made this year,” Finance Minister Christian Lindner said in a social media post.
Along with the new budget plan, the government will submit a resolution to parliament declaring an “extraordinary state of emergency,” the legal basis for suspending the debt rule, he said.
Germany’s top court last week said Chancellor Olaf Scholz’s government violated the constitutional debt rule by transferring money meant to support the coronavirus pandemic to a fund to fight climate change.
The decision left Berlin with a 60 billion euro ($65 billion) hole in its budget and called into question much-needed investment.
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Following the decision, the government suspended most of the projects funded through the climate fund and imposed a broad spending freeze for the rest of 2023.
Written into the constitution in 2009 under former chancellor Angela Merkel, the debt ceilings limit new borrowing in Europe’s top economy to 0.35 percent of gross domestic product.
The brake was suspended from 2020 to 2022 during the pandemic and energy crisis, but was due to be reinstated this year.
Coalition agreement
The re-suspension of the debt rule will be a bitter pill to swallow for the coalition between the Social Democrats, the Greens and the pro-business FDP, which had pledged to reapply the constitutional brake this year.
The often criticized commitment to balanced budgets has become a symbol of Germany’s fiscal prudence.
The new suspension of the debt rule is a particular blow to Lindner, who has staked his reputation on sound financial management.
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The finance minister, who has stressed the importance of clear debt limits, avoided direct reference to the brake at an earlier news conference.
Lindner said he would present the new budget for 2023 next week to “clear the decks” before “we can talk about 2024 and beyond.”
“No new debt will be taken on. Instead, funds that have been used for crisis management will be put on a secure legal footing,” Lindner said in his social media post.
The supplementary budget will amount to 40 billion euros, bringing Germany’s total deficit for 2023 to 85 billion euros, German weekly Spiegel reported.
The total included money that has already been largely paid out to help households and businesses cope with rising energy prices, Spiegel reported.
Voting delay
The government this week delayed a planned vote on next year’s budget while it reviewed the court ruling. MPs were due to have a final vote on the budget next week.
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The decision had already fueled tensions in Scholz’s restive coalition, at odds over how best to spend its resources.
The conflict has particularly pitted Lindner and his party, the FDP, against the other two parties, some of which argue that the constitutional rules should be reformed.
Worth 212 billion euros before the court ruling, the climate fund aimed to accelerate Germany’s shift to a zero-emissions economy.
The cash was also earmarked to boost domestic semiconductor production as Europe tries to reduce its reliance on Asian chip imports.
The pot of money is one of several outside the main state budget, including a €100 billion fund to bolster the military in response to Russia’s war in Ukraine.
The defense ministry said on Thursday that the armed forces fund was exempted from the government’s spending freeze in 2023.
Source: AFP