Germany freezes spending as budget crisis deepens – POLITICO

BERLIN — Germany’s Finance Ministry has imposed a spending freeze on all federal ministries, deepening a budget crisis that has rocked the ruling coalition since an explosive ruling last week by the country’s highest court.

The Finance Ministry’s decision, which suspends most new spending authorizations, follows a Constitutional Court ruling last week that blew a 60 billion euro hole in the government’s coffers.

The government is now bracing for the much larger financial implications arising from the decision that could limit its ability to draw money from various special funds that were created to circumvent the nation’s debt brake, which limits the federal deficit at 0.35 percent. of GDP, except in cases of emergency.

In a letter to all ministries, State Secretary Werner Gatzer said the Finance Ministry was freezing spending “in order to avoid new upfront charges in future financial years.” This measure has no impact on the financial commitments already made, Kevin Kühnert, general secretary of Chancellor Olaf Scholz’s Social Democratic Party (SPD), declared on public television on Monday.

As the government struggles to understand the full consequences of last week’s court ruling, lawmakers in the Bundestag budget committee held a public hearing with legal experts on Tuesday morning to assess its impact.

Although the financial deficit of 60 billion euros resulting from last week’s court ruling will in theory extend over several years, in practice the effect will be more immediate, said Thiess Büttner, a professor at the University of ‘Erlangen-Nuremberg, in a written statement to parliament ahead of Tuesday’s parliament. audience. “It is necessary to consolidate the budgetary planning of 52 billion euros for the coming year,” he said.

The government’s inability to find the money it needs to finance its vast program to accelerate the green transition and protect German industry from high energy costs is leading to growing calls, particularly on the political left, to that the government suspend the debt brake by declaring an emergency, as was the case during the coronavirus pandemic and following Russia’s full-scale invasion of Ukraine.

“In my opinion, we will not be able to avoid applying the exemption rule for 2024, perhaps even longer,” SPD Bundestag Chairman Rolf Mützenich told German newspaper Stern.

Yet members of the Free Democratic Party (FDP), part of the country’s three-party ruling coalition, have so far resisted calls to suspend the debt brake.

FDP Finance Minister Christian Lindner said last week that the Constitutional Court’s decision did not justify the suspension of the debt brake.

“We will have to make more effective policies with less money than in the last decade,” he said.

Still others within the government are pushing for a fundamental reform of the debt brake, introduced in 2009.

“The way the German debt brake is constructed is not intelligent enough,” Green Economy Minister Robert Habeck told public broadcaster ARD on Monday. The debt brake, he added, was “put in place in a different time, when we still had cheap gas from Russia, when China was still… our purchasing market, and when Americans were still reliable and loyal friends and shouldered the military burden.” off our shoulders because there was no war in Europe. »

Those times, he added, are now over.