The Karlsruhe budget ruling is throwing the federal government’s finances into disarray. The federal states are also looking at Berlin with trepidation. And what does the future of the debt brake look like?
The Federal Council is meeting this Friday for the first time since the Karlsruhe budget verdict. The states are wondering which financial commitments from the federal government still apply after the Federal Constitutional Court declared the reallocation of 60 billion euros in the 2021 budget to be null and void last week. Meanwhile, Federal Finance Minister Christian Lindner (FDP) called on the traffic light coalition to make savings in view of the budget crisis. “We are talking about a significant additional need for consolidation,” he told the “Handelsblatt”. It’s about double-digit billion contributions per year.
Ampel wants an exemption from the debt brake this year
The traffic light coalition wants to use the exemption from the debt brake this year because of the Karlsruhe budget ruling. Lindner announced on Thursday that he would present a supplementary budget to the cabinet next week in consultation with Chancellor Olaf Scholz (SPD) and Vice Chancellor Robert Habeck (Greens). A Lindner ministry spokeswoman added that the federal government would propose to the Bundestag to declare an extraordinary emergency. Loans that have already been used this year should be legally secured subsequently.
The budget ruling from Karlsruhe is about money that was approved as a Corona loan, but was subsequently intended to be used for climate protection and the modernization of the economy. At the same time, the judges decided that the state was not allowed to reserve emergency loans for later years. Therefore, billions more for future projects are at risk.
Growth Opportunities Act and basic child security in the Federal Council
The so-called Growth Opportunities Act, which the Federal Council is supposed to decide on, could be affected. It provides tax relief for companies of seven billion euros annually until 2028, which is intended to give the sluggish German economy new impetus. However, implementation will not begin so quickly anyway because the state chamber is likely to appeal to the mediation committee regarding the law already passed by the Bundestag. The states criticize that they and the municipalities have to bear around two thirds of the costs of the law. This is overwhelming her.
The state chamber will also be dealing with the controversial basic child welfare provision on Friday. Initially, she can only make a statement. There has also been a question mark hanging over the billion-dollar project since the ruling from Karlsruhe. CDU leader Friedrich Merz has already called for a waiver of this as well as the higher citizens’ allowance and the heating law in order to close the budget gap.
The federal budget for next year is still pending
It remains unclear when the 2024 federal budget can be passed. The traffic light factions of the SPD, Greens and FDP have canceled the planned budget discussions in the Bundestag next week. But they haven’t completely given up on closing before the end of the year. The coalition says there is the possibility of shortening deadlines and special meetings. Scholz said on Wednesday that he expected a quick and very timely conclusion.
Lindner told the “Handelsblatt” that it would be advisable to look at the 2024 and 2025 budgets together. “Because in my view, structural changes are inevitable.” According to Lindner, in addition to the climate and transformation fund, the economic and stabilization fund, from which the electricity and gas price cap is financed, must be placed on a different legal basis this year and ended in 2024. The development aid fund for the victims of the 2021 flood, which was set up by the previous government, is also not constitutionally safe.
Debate about the future of the debt brake
When asked whether he would also declare an emergency in 2024, Lindner said that he was currently only concerned with 2023. However, he clearly rejected calls for the debt brake to be relaxed. According to him, there should be no tax increases either.
The Greens and SPD, on the other hand, want to talk about the future of the debt brake. Green Party leader Ricarda Lang said on Thursday in ZDF’s “heute journal”: “One is the question of suspension, for example also for 2024 or 2025. We now have to discuss that within the government,” she said. The second question concerns a fundamental reform of the debt brake anchored in the Basic Law. SPD leader Saskia Esken told the newspapers of the Funke media group (Friday): “We are still in a crisis situation, the effects of which will also be felt in the coming year.” It will be necessary to extend the exemption for 2024 as well.
Wüst demands a clear word from Scholz
North Rhine-Westphalia’s Prime Minister Hendrik Wüst demanded concrete statements from Chancellor Scholz (SPD). People expected clarity, said the CDU politician before the meeting of the Federal Council in Berlin. Companies and municipalities should not be the ones to suffer from the federal government’s debt problems. “And that’s why the Chancellor is now called upon to speak out clearly about the situation. What is still possible? What is perhaps no longer possible? And how do we get through these difficult times?”
Wüst called the debt brake a “protective wall against the current government’s encroachment on the wallets of future governments.” The principle is good and correct. The first question now is where to get money again. “Everyone who is broke must first be honest and that also applies to the federal government.”
The parliamentary managing director of the Union faction, Thorsten Frei, spoke out against changing the debt brake. He told the newspapers of the Funke media group (Friday): “In times of record state revenues, the problem is not the debt brake, but the unconstitutional economic activity of the traffic light coalition. The government is obviously not in a position to set priorities.”
The debt brake anchored in the Basic Law gives the federal government only limited scope for taking out loans. Exceptions are permitted in the event of natural disasters and in exceptional emergency situations, such as most recently due to the corona pandemic and the war in Ukraine.