2023-11-15 19:59:35
A snub for Olaf Scholz’s government: Germany’s highest court sanctioned its budgetary plans on Wednesday, November 15, considering that it had violated the country’s strict budgetary rules, plunging several key future investment projects into uncertainty. .
The Constitutional Court ruled that the reallocation of 60 billion euros initially intended for the fight against the coronavirus to a fund “climate and transformation”was “incompatible with the Fundamental Law” nationale.
This ruling, which purely and simply eliminates these financial resources, seriously complicates government plans for green investments, essential for the country’s energy transition.
A referral to the CDU
The jurisdiction was seized by the main opposition party, the conservative CDU. They considered that the government had acted in violation of the constitutional rule known as “debt brake”.
Enshrined in the German Basic Law since 2009, it limits new public borrowing, and therefore the deficit, to 0.35% of GDP each year.
Suspended between 2020 and 2022 due to the Covid pandemic, this brake has been in effect again since this year. But Germany has massive investment needs, particularly to achieve its climate objectives. The coalition has committed to reaching 80% renewable electricity by 2030.
To reconcile these two imperatives, Berlin performed a budgetary sleight of hand. After realizing, at the end of 2021, that 60 billion euros of debt allowed by this suspension of the limitation of deficits had not been used, the government decided to integrate them into a special fund to “climate and transformation”not accounted for in the budget.
An illegal maneuver
An illegal maneuver according to constitutional judges. They argued that the exception to the debt brake was limited to “emergency situations”, in this case the coronavirus pandemic. Although the government argued that the climate fund helped deal with the lasting economic consequences of the health crisis, the argument did not convince the judges.
In addition, the retroactivity of the measure, taken at the beginning of 2022 for a 2021 budget, “violates the principle (…) according to which the budget must be determined in advance”they decided.
This unprecedented sanction in Germany for a federal budget could have an impact on the use of other special funds, which Berlin has increased to circumvent budgetary rules, particularly in the defense sector due to the war in Ukraine.
A new economic plan
The government has announced that it will re-examine all methods of preparing the budget, both at the federal level and at the regional level, judging that the judgment could have a very broad impact. Chancellor Olaf Scholz also promised to “work on a new economic plan” to deal with the budget hole of 60 billion euros.
The Minister of Finance, Christian Linder, indeed announced a « gel » disbursement of climate fund funding, which will affect planned projects “from 2024”.
Expected to be endowed with 212 billion euros, the fund aims to accelerate Germany’s transition to an emissions-free economy, financing measures such as replacing gas boilers with more climate-friendly heat pumps.
Wider use
But its use has been expanded as needed in recent months. The government was counting on this envelope to finance part of a 30 billion euro project aimed at lowering the price of electricity for its industry.
And its aid of several billion euros to finance the installation of strategic semiconductor factories in the country, in particular projects by the American Intel and the Taiwanese TSMC. “Everything will be examined”warned a spokesperson for the Ministry of the Economy.
More generally, the call to order revives a recurring debate in the country on the advisability of relaxing or even removing the constitutional brake on debt, considered obsolete and too rigid by its detractors.
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