to germany recession Another urgent problem arose: blocking 60 billion euros Constitutional Court (TC) and that they should feed them Climate and Transformation Fund (KTF)The key to promoting major energy projects of Olaf Scholz’s triumvirate. Amid disagreements in the governing coalition between supporters and opponents to repeal or suspend the law debt brakeThe Ministry of Finance chose to block the budgets for the rest of this year in order not to compromise on the budgets corresponding to 2024.
News of the blockade reached the media through the weekly magazine “Der Spiegel”, which leaked a circular of the ministry directing the EU. Liberal Christian Lindnera staunch advocate of the debt brake. The text explains that only expenses that are “absolutely necessary” and do not require a commitment for the next year can be covered. From the Ministry of Economy, which is chaired by green robert habeckBefore this text was learned, people had already been warned about the “even dramatic dimensions” of the constitutional decision in terms of large projects and investments, as well as its consequences on the entire economic sphere, industry and citizens.
Lindner’s purpose in issuing the order, to avoid any non-essential budget burden, not only affects the future of KTF. It will also affect the finances of the “Länder”, the federal states subject to the fiscal rule or debt brake, as established by the German Constitution; This rate cannot exceed 0.35% of total income. gross domestic product (GDP). However, it is considering suspending this ban in exceptional cases such as economic depression, war or natural disaster.
Opposition victory in the Constitutional Court
The trigger of the current situation is the lawsuit filed by the conservative bloc, the driving force of the German opposition, against Scholz’s decision at the beginning of the current legislative assembly to transfer loans and resources to the KTF from the fund created to alleviate the damage. created by Pandemic, but in the end they were not used. During this period of the pandemic and due to the special conditions it brought, the debt brake was stopped. Karlsruhe has now decided that these funds cannot be used in subsequent years and cannot be used for purposes other than those approved at that time.
The decision in Karlsruhe, the city where TC is located, fell like a bombshell on the tripartite structure, which was already divided on everything affecting public spending. HE Scholz’s Social Democratic Party (SPD) and Vice-Chancellor Habeck’s Greens advocate making the fiscal rule more flexible. Lindner, on the other hand, strictly adheres to this identification mark in line with the budget constraint.
“All citizens and all economic areas will be affected. It’s not just about obscure environmental projects Climate Protection. These are also funds to promote projects and investments,” Habeck warned in an even more dramatic tone in his statement to the first public television channel Ard.
The blow around the debt brake
These statements were made before the budget blockage was known, but the minister and the vice-chancellor made a hint in these statements. Contraction in the German economy. The latest forecasts of the Ministry of Economy, in line with forecasts of the main economic institutes and Government advisors, put it as early as 2023. 0.4% contraction. His ministry predicted that it would return to the growth path of 1.3 percent in 2024. He has now pointed to another contraction, or “lower-than-expected growth”.
Habeck also noted that the debt brake is outdated when it comes to tackling debt. special needs”, According to him, this doesn’t just include the pandemic. The same goes for the energy crisis that emerged with the invasion of Ukraine and its consequences for a country like Germany, which he reminds us had hitherto been largely dependent on Russian supplies.
Whatever the internal struggle in the tripartite party or the victory of the conservative opposition before the Constitutional Court, the fact is that a change to this fiscal rule today will not succeed before Parliament (Bundestag), because in the current relationship of powers, majority support for the relevant constitutional amendment will not be obtained.