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Germany’s government has indefinitely suspended a vote on the country’s budget for 2024, as the constitutional crisis over fiscal policy in the eurozone’s largest economy worsens.
MPs representing the three coalition parties of chancellor Olaf Scholz said a vote on Thursday to approve next year’s budget had been cancelled after the country’s highest court declared last week that government plans to move €60bn to a climate fund broke fiscal rules.
“The [court] has presented us with major challenges,” the MPs, who sit on the Bundestag budget committee, said in a joint statement. “We want to respond to this with care and draw up a budget that takes into account all the arguments in the judgment.”
In a ruling that has implications for hundreds of billions of euros of other spending commitments, the constitutional court said the government’s plans failed to comply with the country’s debt brake, a measure set up to limit deficits to 0.35 per cent of gross domestic product.
Citing pressure from Christian Democrats (CDU), the opposition party, the MPs said the budget crisis would now need to be fully debated by parliamentarians.
The vote, originally set for last Thursday, was previously suspended for a week.
With the Bundestag set to close on December 15, the government could struggle to push through a vote this year — even if it secures an emergency sitting of the parliament.
If a budget is not agreed, automatic restrictions will kick in on spending across all federal government departments on January 1 and will last until a budget is finalised.
Last Wednesday, Karlsruhe-based judges eviscerated plans for the government to transfer €60bn of funds earmarked for the pandemic to its Climate and Transformation Fund (KTF). The KTF is a centrepiece project of the Scholz coalition and essential for government plans to decarbonise the German economy.
After initially insisting spending plans were otherwise on track, the government’s assurance began to crumble this week.
On Monday, vice-chancellor Robert Habeck, of the Green party, warned that a €200bn fund set up to shield consumers and businesses from rising energy costs could also be ruled unconstitutional.
The following day, the finance ministry of Christian Lindner, of the liberal Free Democrats, wrote to all government departments ordering an immediate freeze on all new, uncommitted spending plans.
The CDU has blamed the government for having brought the crisis on itself by agreeing “off balance sheet” funding outside of normal budgetary planning rules. It has also accused the coalition of using its majority in the Bundestag to rush measures through without proper agreement.
“The Zeitenwende . . . has just become a reality for you,” CDU leader Friedrich Merz told the government last week, referring to the geopolitical “turning point” often quoted by Scholz as the justification for large, transformative amounts of new spending, including billions of euros of aid to Ukraine. “Everything is no longer possible,” said Merz.
The CDU supports cuts to social security and benefits to cover the cost of reforming the German military and enable subsidies for industry to continue.
The CDU and its sister party, the CSU, were responsible for bringing the case to the court in Karlsruhe, and are ardent supporters of the debt brake, which is constitutionally enshrined.
One way forward for the government would be for the Bundestag to vote to declare spending outside of the debt brake permissible in connection with an emergency, such as the war in Ukraine. Emergency funds were allowed during the early stages of the coronavirus pandemic.
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