BERLIN — German Finance Minister Christian Lindner signaled Thursday that the government will seek to suspend the country’s debt brake in the aftermath of a constitutional court ruling that has plunged the country into a severe political and budgetary crisis.
“There is now new legal clarity on how we have to deal with special assets and emergency loans,” Lindner said in a short statement to reporters. “We will now put expenditure, particularly for the electricity and gas price brakes, on a constitutionally secure footing.”
Germany’s constitutional court ruled last week that a government plan to repurpose €60 billion left over from an emergency COVID-19 fund to finance the ruling coalition’s green agenda was unconstitutional. But the ruling also has far wider implications that limit the government’s ability to draw from a variety of special funds created to circumvent the country’s constitutionally enshrined debt brake, which restricts the federal deficit to 0.35 percent of GDP, except in times of emergency.
That ruling has now forced the government to retroactively include more than €30 billion of spending for an energy price brake — which had initially been financed through a special fund outside the regular budget — as part of its regular spending. This means the ruling has all but forced the German finance ministry to declare an emergency for 2023 and suspend the debt brake.
Linder said he would present a draft supplementary budget for 2023 at a cabinet meeting on Wednesday.
“With the supplementary budget, the federal government will propose a resolution to the Bundestag to establish an extraordinary emergency situation for 2023,” said a finance ministry spokesperson. “No new debt will be incurred, but only the funds already used to overcome the crisis will be placed on a secure legal basis.”
The budgetary crisis sparked by last week’s court ruling has deeply embarrassed Germany’s tripartite coalition government, opening it to accusations that it has attempted to create a veneer of fiscal discipline while finding creative ways to finance ambitious — and expensive — projects to accelerate the country’s green transition and relieve customers and industry from the impact of high energy costs.
The embarrassment is particularly acute for Lindner, the conservative leader of the Free Democrats who sought to present himself as the coalition government’s fiscal hawk, providing a check on left-leaning largesse even as he has consented to ambitious spending programs based on the use of special funds.
