What happens next after the budget ruling of the Federal Constitutional Court? In an interview with the daily topics warns Economics Minister Habeck: All proposed solutions are not enough so far. He calls on the opposition to cooperate.
daily topics: Every additional day of uncertainty for companies and citizens weakens our economy. How quickly can you bring safety back?
Robert Habeck: As fast as possible. The judgment may not have been fully interpreted in the first interpretation. It was said that there is now a lack of money for climate protection. It would be correct to say that the German economy and the German state lack money to transform the economic substance or to grant subsidies that trigger further investments. At the moment there is a sense of anxious waiting across the country. And that is not a good situation for an economic nation that is currently in a phase of weakness.
“The justification must be read very carefully”
daily topics: You say that this judgment is still being interpreted, but the dimensions were clear beforehand. You said in the Bundestag a few months ago that if the lawsuit was successful, it would hit Germany hard in terms of economic policy. Probably so hard we won’t pass. So the dimension was clear. Didn’t anyone think about developing a plan B back then?
Habeck: Yes, you have that. Nevertheless, the judgment must be read and interpreted carefully. The judgment refers to the 60 billion that were transferred from the Corona period to the so-called economic and transformation fund, which is actually a fund for the protection and further development of the German economy and industry. The justification must be read very carefully. It is fundamental, and it may go beyond these 60 billion.
daily topics: But there aren’t many options for a solution. The FDP does not want to increase taxes, the SPD does not want to reduce social benefits. The Greens also have their red lines. Do you have an idea of what a path could look like?
Habeck: Of course, we also have our own suggested solutions. But all the suggestions that are currently circulating – such as cutting social benefits – do not come close to the size of the problem. If it stays at 60 billion, that would be bad enough. But things can get even more dramatic if other funds are also affected.
“The German National economy will shrink”
daily topics: Do you wait until a verdict overturns this too, or do you approach it proactively?
Habeck: The federal government has its own departments that deal with financial constitution and judgments. There is a specialist hearing in the German Bundestag on Tuesday. We’ll wait and see and then come to a decision.
daily topics: Is it conceivable to declare this year an emergency and thereby be able to take on more debt?
Habeck: I can’t say that conclusively here. But I can quote from the judgment and it says that if you spend money from a special fund in a year, then an emergency situation must be declared for that year. We spent money in 2023 from the so-called economic and stabilization fund. This is the money that relieved many, probably almost all, Germans of high gas, electricity and district heating prices last winter.
According to my reading of the judgment, this must be justified by an emergency situation. But we will discuss in the committee whether this is correct and then come to a decision. You rightly said that there is great uncertainty. But this ruling does not affect any seemingly absurd climate protection projects; everyone will already be affected by it. As a result of this ruling, the German economy will shrink and grow less than expected. Stimulus money will be withdrawn from the country.
Criticism of the debt brake
daily topics: But that doesn’t make it any easier; in fact, it makes it even more dramatic if the entire economy is affected. However, you apparently do not consider other options, for which you would need a two-thirds majority in the Bundestag, to be realistic anyway. Otherwise you wouldn’t have publicly criticized the CDU leader like that.
Habeck: Well, personally I make no secret of the fact that I think the way the German debt brake is designed is not intelligent enough. It is very static and it does not differentiate between money that we spend over the course of the year and investments in the future that will only pay off after ten, 20, maybe 50 years. That doesn’t seem wise to me. And it was also built in a different time, when we always had cheap gas from Russia, when China was always our workbench or our purchase market, when the Americans were always reliable, loyal friends and relieved us of the military burden because there was no war existed in Europe. Those were the conditions and they seem to have changed.
daily topics: Citizens have to pay more for energy, electricity and gas. What should consumers expect?
Habeck: If the ruling also refers to the economic stabilization fund, i.e. this double whammy, it would be the case that the protective shield for the next winter is no longer there. And the network fees that we have capped through this fund would then fall fully on consumers.
Appeal to the Union
daily topics: So the big pots of money are gone for now. What basis does the coalition still have?
Habeck: Well, the foundation of the coalition is not just based on financial effectiveness. For me as Economics Minister, this is a major challenge for the country. (…) Of course the opposition has the right to sue and the court makes its judgments. Nevertheless, the question now is: Can we help get out of this difficult situation? The situation is so difficult and so threatening for many that I think we now have to work together to find solutions. Many CDU prime ministers and fellow economics ministers are very worried that their projects cannot be implemented. This goes far beyond party lines.
This interview was shortened for the written version. The text is based on the complete recording, which is attached as a video. The broadcast version was shortened for time reasons.