”Perfect Chaos” is how the news portal T-online describes the situation in the German Bundestag after the country’s highest court, the Constitutional Court, ruled on the Climate Transition Fund and on the eve of the next meeting of the Budget Committee Nov. 22. The first meeting last week ended with no agreement on the text to be submitted to the floor for a Bundestag vote.
The Karlsruhe-based Constitutional Court had ruled that money shifted from the Covid emergency fund to the so-called Climate Transition Fund was unconstitutional, thereby creating a €60 billion hole in the Federal budget.
Meanwhile, the Finance Ministry has not only issued a spending freeze for 2024, but is also cracking down on 2023 appropriations. According to circles in the Federal Finance Ministry, the ministry “is stopping the commitment appropriations in 2023 in order to avoid advance charges for future years,” ARD reports. A commitment authorization gives an administration the opportunity to enter into payment obligations for future years, for example, for multi-year projects. It also stated that existing liabilities would continue to be honored, but that no new ones could be entered into. “In exceptional cases, commitment appropriations can be unblocked,” the sources said.
Despite the problems created by monetarist policies at home, Berlin insists on keeping those rules in the EU Stability Pact, which is supposed to undergo a reform. The meeting scheduled for Nov. 23 has been postponed because of the impossibility to find a compromise among opposite positions. On one side, so-called southern countries insist on a softening of deficit and budget rules, while the so-called hawks, led by Germany, insist on stricter rulings than in the past.
The “northern” proposal is that the deficit should be reduced by 0.5% of GDP every year. The Italians and the French want that debt service is not included in the calculation, because, especially due to higher interest rates, this would force indebted countries to an endless run-up. Finance Minister Christian Lindner insists that all items should be included in the calculation in order to better evaluate the conduct of countries that violate the rules.
A compromise must be reached by Dec. 8, lest the preceding rules will be reintroduced. The Stability Pact demands a zero deficit target and 60% cap for the debt. It was suspended during the Covid emergency and should be reintroduced on January 1, 2024. A third option is that the suspension will be extended until a consensus is reached.