Germany delays 2024 budget after court ruling shakes government

The German parliament’s budget committee has delayed a meeting originally set for Thursday (23 November) to finalise the 2024 budget, following a court ruling that cancels €60 billion off a climate fund and could have broader implications for other public spending.

The German constitutional court last week Wednesday (15 November), nullified a decision to transfer €60 billion of unused debt authorised during the COVID-19 pandemic into a climate fund, leaving to the government how to replace the cancelled sum.

While the ruling affects the “Climate and Transformation Fund” which is not officially part of the federal budget, Chancellor Olaf Scholz (SPD/S&D) initially announced that negotiations for the regular 2024 budget would continue, as these calculations were not directly affected.

On Wednesday (22 November), however, leaders of Germany’s three-party coalition announced that the budget negotiations would be delayed, cancelling a budget committee meeting on Thursday during which the 2024 budget was meant to be finalised.

“We believe it is necessary to carefully consider this judgement when drawing up the budget for 2024,” the parliamentary group leaders of Scholz’s Social Democrats, Greens and liberal FDP (Renew Europe) said in a joint statement.

“Our aim is to discuss the budget swiftly but with due care in order to create planning certainty,” the group leaders added, without however specifying a new date for the budget adoption.

Initially, the budget was meant to be finalised in the committee this week, before being adopted by the plenary of the Bundestag on 1 December.

During an expert hearing of the committee on Tuesday (21 November), legal experts voiced concern that the ruling could not only affect the €60 billion transferred into the climate fund, but also other funds, such as a €200 billion “energy shield” set up during the energy crisis following the Russian attack on Ukraine in 2022.

Given the justification of the ruling, which forbids the use of debt justified with an emergency situation in one year in subsequent years, using parts of the €200 billion in 2023 to stabilise energy prices could have been unconstitutional, too, Hanno Kube, law professor at Heidelberg University said during the hearing.

“Only when the budget for 2023 is constitutionally secured can the budget for 2024 be planned and finalised in accordance with the constitution,” Kube said during the hearing.

Replace the €60 billion – or cut spending?

To secure the legality of the energy aid in 2023, the government might retroactively declare an emergency situation for 2023, arguing that the repercussions of the war in Ukraine were still noticeable.

In a TV interview on Tuesday evening, Economy Minister Robert Habeck (Greens) said that Germany was still “in a crisis situation”, which hints that the government wants to make use of that option.

“Various crises are overlapping. When the government started, there were still the after-effects of the coronavirus pandemic, the deep economic slump, then there was the energy crisis, then there was the unstable global situation,” Habeck said.

“In order to protect and further develop Germany’s economic substance in this situation, to renew prosperity, create jobs and stabilise regions, we have made good use of these funds,” he added.

Habeck did not want to give details on how the government plans to replace the €60 billion cancelled from the climate fund, warning however that cutting expenditures could also lead to substantially less private investment into the green transition.

“The €60 billion is only the government spending. The sum they are supposed to trigger, the investments, is many times larger,” he said.

During the parliamentary hearing, Habeck’s view was backed by several economists, who warned that a cut in investments could see the German economy stagnating for the coming years, as well as falling behind international competitors, such as the US, who are heavily subsidising their green industries.

‘Readjustment’ of climate policy

Economist Veronika Grimm, a member of the council of economic experts advising the government, however, called for a “readjustment of climate policy”, questioning the largest share of the spending from the “Climate and Transformation Fund” which is supposed to support energy efficiency of buildings.

“We cannot operate a system where we continually rely on massive public debt, because we will not be able to sustain this for long as a European Union,” Grimm said, adding that “then we will be hit by sovereign debt crises long before we are climate neutral”.

Instead, she called to mobilise more private investments, including from richer households, by increasing the price of oil and gas through higher carbon prices, which are currently fixed at €30 per tonne of CO2.

“If someone earns well and is in a good position and can afford it, then the question arises as to why the state should actually pay for a heating system replacement,” she said.

Instead of subsidising the replacement of heating systems by the state, with higher carbon prices, “some of those who are supposed to change their heating and are now supposed to do so through the subsidy will do it themselves because it is simply worthwhile,” she added.

[Edited by János Allenbach-Amman/Nathalie Weatherald]

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