The German government has suspended indefinitely a vote about the country’s 2024 budget as the crisis in fiscal policy, which is the largest economy in the eurozone, worsens.
The three coalition parties representing Olaf Scholz, the Chancellor of Austria, said that a vote to approve the budget for next year had been cancelled on Thursday after Germany’s highest court declared in the past week that the government’s plans to transfer €60bn into a climate fund violated fiscal rules.
In a statement, the Bundestag members of the budget committee said that the [court] had presented them with significant challenges. “We will respond with care to the court’s judgment and prepare a budget which takes all arguments into consideration.”
The constitutional court ruled that the government plans did not comply with the debt brake of the country, which was designed to limit the deficit to 0.35 percent of the gross domestic product.
The MPs cited pressure from the Christian Democrats (CDU), an opposition party, and said that the budget crisis will now be discussed in full by the parliamentarians.
Originally scheduled for last Thursday, the vote was suspended for one week.
The Bundestag is set to close at the end of December, so the government may struggle to get a vote through this year – even if they secure an emergency session.
In the absence of a budget, automatic spending restrictions will be imposed on all departments within the federal government on January 1, and will continue until a final budget is agreed.
Karlsruhe judges destroyed plans last Wednesday to transfer €60bn from the government’s Climate and Transformation Fund to the Climate and Transformation Fund. The KTF, a central project of Scholz’ coalition, is essential to the government’s plans to decarbonise Germany.
After initially claiming that plans for spending were on track, this week the government began to unravel its assurance.
Robert Habeck of the Green Party, who is vice-chancellor, warned on Monday that a €200bn energy fund created to protect consumers and businesses against rising costs might also be declared unconstitutional.
Christian Lindner of the liberal Free Democrats’ finance ministry wrote the following day to all government departments, ordering an immediate freezing of all new uncommitted expenditure plans.
CDU accuses the government of causing the crisis by approving “off-balance sheet” financing outside normal budgetary planning regulations. The CDU also accused the coalition government of using their majority in the Bundestag for rushing through measures without proper agreement.
“The Zeitenwende . . . Last week, CDU leader Friedrich Merz addressed the government, referring the “geopolitical turning point” that Scholz often cites as the reason for new, large-scale spending, such as billions of euro in aid for Ukraine. Merz said, “Everything has become impossible.”
CDU cuts in social security and benefits are supported to pay for the costs of the German military reform and to allow subsidies to industry to continue.
The CDU, along with its sister party the CSU were responsible for bringing this case before the Karlsruhe court. They are also ardent advocates of the constitutionally-enshrined debt brake.
The government could vote for the Bundestag, allowing them to spend money outside the debt brake in an emergency situation such as the conflict in Ukraine. Emergency funds were permitted during the early stages the coronavirus epidemic.