Germany, shocked by a court ruling, finally has a budget
Nearly a month after a court ruling left a hole in Germany’s 2024 budget, the government in Berlin introduced a new spending plan that included cuts to programs to tackle climate change, but reaffirmed its pledge to spend 8 billion euros ( $8.6 billion) in direct military aid. to Ukraine.
The new budget will comply with constitutional rules against incurring new debt, the government said.
“We continue with the climate-neutral transformation of our country. We strengthen social cohesion. And we stand closely by Ukraine’s side in its defense against Russia,” Chancellor Olaf Scholz said on Wednesday morning.
“However, it is clear that we will have to make do with significantly less money to achieve these goals,” he added.
Cuts were made to a fund to help companies become more environmentally friendly, and subsidies for electric vehicles and solar energy were reduced. Promised subsidies for a new semiconductor factory will be retained.
The spending plan was announced before lawmakers went on vacation Friday and came after lengthy and difficult negotiations that threatened to rupture the government’s three-party coalition. Lawmakers have yet to vote on the plan, but it is expected to be adopted because the coalition has a majority in parliament.
Germany’s budget crisis began four weeks ago, when the country’s highest court ruled that the government had violated the constitution by transferring a €60 billion special fund set up to deal with the Covid pandemic emergency. transformed into a ‘climate and transformation fund’. German law sharply limits government borrowing above certain limits, unless the money is intended for emergencies. Although the pandemic qualified as an emergency, the court said ministers could not use the money for other purposes.
The money was scheduled for both 2023 and 2024. To keep this year’s budget within the law, the government said rising energy costs due to Russia’s war in Ukraine posed an emergency. But that designation would not apply to next year’s budget, leaving a deficit of €17 billion.
That put a spotlight on the differences between the coalition partners: the Greens want to spend money on climate transformation; the social democrats who want to secure additional funding for social security benefits; and the liberal FDP party, which wanted to avoid and maintain tax increases subsidies for commuters who use cars. Christian Linder, the head of the FDP and the finance minister, seemed prepared to start 2024 without having a budget.
The crisis has taken a political toll on a government that has faced criticism for other reasons. According to a recent national poll, only 19 percent of respondents thought Mr. Scholz was qualified for the post of chancellor. And the Conservative Party leader, who has been critical of the government’s handling of budget issues, demanded Scholz be given a vote of confidence when parliament returns in 2024.
While there was some criticism of the budget agreement from business groups, many agreed that it was important to finally have a budget.
“It is both good and important that the federal government has reached an agreement,” Bertram Kawlath, the vice president of the VDMA, a trade association of mechanical engineers, said in a statement. “The weeks of uncertainty are now over, paving the way for important investments,” he said.