The call to order from the constitutional judges will not have been without effect. Germany is preparing to suspend for the fourth consecutive year its rule of strict limitation of the public deficit in an attempt to resolve a serious national budgetary and political crisis.
The government “will present a collective budget” to “secure” the spending planned for this year, Liberal Finance Minister Christian Lindner told the press on Thursday. He added on his account of the country at 0.35% of GDP. Already suspended between 2020 and 2022 due to the Covid pandemic, this debt brake had to be respected again this year. This will no longer be the case.
The government deficit at 85 billion euros
The collective budget amount will reach around 40 billion euros, according to Der Spiegel magazine, which is expected to almost double the government’s forecast deficit, to 85 billion euros. Berlin faces a deep crisis caused by a resounding ruling by the Constitutional Court last week.
The country’s highest court canceled the transfer of 60 billion euros of unused credits – notably from a fund linked to the Covid-19 pandemic – into a program dedicated to green investments and support for industry .
This decision plunged the government coalition of Chancellor Olaf Scholz into disarray, with many key future projects finding themselves threatened, notably the country’s energy transition.
Brake on energy prices
The solution found – a further exceeding of the national deficit ceiling – constitutes a setback in particular for the Minister of Finance, who had promised at the start of the year the return of austerity. The debt brake “is not only a requirement of the Basic Law (constitution), but also a clear budgetary policy signal to combat inflation addressed to the markets and European partners”, the minister then trumpeted.
His plans are now obsolete and the additional budget planned will mainly include expenditure desired by his colleague from the Economy, Vice-Chancellor Robert Habeck, of the Green party, namely a very expensive mechanism to curb electricity prices and gas for households and businesses.
This element is considered vital for Germany, which prospered for years thanks to cheap Russian energy imports, which have now been stopped. These expenses have for the moment been frozen by the Ministry of Finance following the call to order from the supreme judges. The freeze does not, however, apply to the special fund endowed with 100 billion euros since February 2022 to modernize the German army, following the Russian invasion war in Ukraine. Both houses of Parliament will still have to approve the coalition government’s new budget initiative.
New elections?
The priority of the Minister of Finance is now to want to “clarify things” for the current year in order to be able to close the discussions on the 2024 budget. The latter, at an impasse, were postponed indefinitely on Wednesday by the government.
On the political level, the budgetary disappointments only amplify the climate of distrust of a growing part of the public towards the government bringing together social democrats, ecologists and liberals (right), which has only just passed the mid -mandate. Voices in the parliamentary opposition, on the far left (Linke) and the far right (AfD) in particular, are calling for new elections to be held. This option is favored by 46% of the population, according to a recent survey by the Forsa institute.
Public support for government parties continues to decline, to the benefit of conservatives and the far right. According to a recent poll for the RTL-Germany channel, 66% of Germans do not think that Chancellor Olaf Scholz will be able to overcome the crisis the country is going through.