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German Constitutional Court Ruling Another Slap in the Greens’ Face

Germany’s Constitutional Court ruled yesterday that the government’s practice of shifting non-used funds for compensation of coronavirus-related losses to the Climate and Transformation Fund (KTF) is illegal. This leaves the German government with a financial gap of €60 billion and threatens to derail many projects, including infrastructure ones declared climate-relevant.

“The ruling is the worst-case scenario for the ‘traffic light’” three-party government, says economist Jens Südekum from Heinrich Heine University in Düsseldorf, who advises the Green Economy Minister Robert Habeck, summarizing the implications of the judge’s decision. The budget for the coming year will still be able to be passed this week in the adjustment session. By the end of the year at the latest, however, the federal government will have to draw up a new economic plan for the next three years that does not include the €60 billion now blocked.

The consequences would be considerable. So far, it looks as if only the energy efficiency funding program, which is intended to subsidize citizens to replace their heating systems, will survive this austerity dictate. “All other planned expenditure is under scrutiny,” says economist Südekum. The electricity price package for the economy would be on the list of cuts, as would the subsidies for the establishment of the chip industry in Germany. “The German economy would be hit hard by this brute austerity course and prosperity in the country would shrink as a result,” says Südekum.

Irony has it that Habeck advisor Südekum is calling now for a fundamental reform of the debt brake, which puts a strict limit to government spendings. He sees the so-called “golden rule” as a good option: The debt brake would continue to apply to all consumptive expenditure, for example the federal subsidy to the pension fund, the citizens’ income, or refugee spending. “However, it would no longer apply to investment expenditure, which could be financed via loans. The urgent expansion of the public infrastructure of roads and transport routes would therefore still be possible,” Südekum told the Swiss financial daily Neue Zürcher Zeitung. (That implies the government could borrow extra money—it just should not be spent on green pipedreams). By contrast, insiders warn, any attempt by the government to plunder social and other budgets to recruit the missing €60 billion for “climate” would blow the government coalition up. And what Südekum omits to mention: a discussion on why and what climate policies make any sense should begin in earnest, particularly to set other priorities than those set by the Greens so far.

The court case was initiated by the opposition CDU/CSU. In spring 2022, the 197 members of the CDU/CSU parliamentary group brought an action before Germany’s highest court. The financial maneuver “does not meet the constitutional requirements” (the debt brake), the judges declared in their ruling.