Budget crisis in Germany

Following the decision of the German Constitutional Court on the debt brake, the budget crisis of the German coalition government worsens.

The letter sent to all ministries by Werner Gatzer, undersecretary responsible for the budget of the German Finance Ministry, stated that all spending commitments in the federal budget were temporarily frozen.

The letter stated that the budget freeze, which was initially only valid for the Climate and Transformation Fund, would be expanded to cover a large part of the federal budget, and that the existing obligations of ministries and institutions would continue to be met. , but no new obligations would be contracted.

Gatzer’s letter states that “it is necessary for the federal budget to review the overall budget situation” and highlights that expenditures requested by ministries after the budget freeze will be allowed in special individual cases.

FINANCING OBSTACLE OF THE CONSTITUTIONAL COURT

On October 15, the German Constitutional Court ruled that the German coalition government’s decision to transfer €60 billion of unused credit due to the coronavirus outbreak to a climate fund was unconstitutional.

The court declared the second additional budget of 2021 unconstitutional and invalid for violation of exceptions in the country’s debt brake.

With the 2021 budget change, the German government decided to transfer the unused loan of €60 billion for Covid-19 epidemic measures to the Climate and Transformation Fund (KTF).

The court’s decision first stated that the debt limit could only be exceeded in an emergency, such as in the Covid-19 crisis, but the transfer of funds to the climate fund did not meet these conditions.

Due to the emergency situation during the Covid-19 outbreak, the German federal government increased its borrowing by 60 billion euros, but the loan in question was not necessary to deal with Covid-19 and its consequences.

The coalition government formed by the Social Democratic Party (SPD), the Green Party and the Free Democratic Party (FDP) wanted to use the loan in question for the country’s Climate and Transformation Fund.

The decision was expected to hit Germany’s budget for 2024. The decision will now require the government to factor in an additional €60 billion and cut spending elsewhere amid disagreements between government partners over tax increases.

Finance Minister Christian Lindner ordered the freeze of the Climate and Transformation Fund budget on November 15, when the decision was announced. (AA)