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The Nov. 15 ruling by the German Constitutional Court blocks the use of €60 billion for the government’s over-ambitious climate and transformation funds KTF, in what is a big slap in the face of green policies. Nominally, the Social Democrats and the Greens intend to fund climate-related projects as much in the same range as before, but their coalition partner Free Democrats partially opposes that, insisting that instead of state funds recruited by special borrowings, the KTF be funded by market-based incomes from the sale of anti-CO2 certificates. The Free Democrats also want to keep the “debt brake” which bans extra state borrowing intact, however SPD and Greens are discussing the declaration of a “climate emergency” modeled on the Covid emergency, which suspended the restrictive debt brake budgeting rules. This constellation drives the coalition government into a major cohesion test and may lead to its falling apart.

A compromise also discussed among the three government parties were possible by raising money, at least in the short term, if payments from the climate fund planned for later years could also be brought forward at least for the next two years. This would make it possible to avoid severe cuts in the short term or suspend the debt brake, but the budget holes in the future would be all the bigger, and the next federal government coming in after the September 2025 election would then have to deal with this—most likely, a government led by the CDU/CSU which is now the opposition and is expected to take the issue again to the Constitutional Court as it did already on the KTF issue that generated the Nov. 15 ruling.

So far, all parties continue to discuss things within the climate-protection paradigm, whereas they should instead take the imbalanced funding situation after the Court’s ruling as an occasion to scrap that paradigm and make new substantial state funding at low interest for real-economic investments available by a removal of the debt brake. At least, discussing suspension of the latter is potentially a small step in the right direction…