Court ruling on Germany’s climate fund to cost 0.5 points of GDP growth in 2024 – econ min

The court ruling on the unconstitutional nature of Germany’s Climate and Transformation Fund (CTF) hits at the country’s “economic core” and urgently requires a resolute and joint response by policymakers at all levels to avoid major damages, economy and climate action minster Robert Habeck said. The loss of 60 billion euros in funds initially earmarked for the CTF had led to an expected loss in 2024 GDP growth of about 0.5 percentage points and the ruling’s negative impact could also persist to a lesser extent in the two following years, Habeck said after a meeting with energy ministers from the 16 German states. “The substance of the German economy has to be defended here,” the Green Party politician said.

Habeck added that his energy minister colleagues from the states and the federal government are ready to “master this challenging situation together,” irrespective of party affiliations or regional interests. “We must find a way out of this” in short time, Habeck argued. It was now necessary to establish trust in the regions and among companies that investments in climate and sustainable transformation projects can be carried out as planned. Especially already agreed support programmes for companies that are at an advanced stage required a swift reassurance that they can be carried out and that funding remains secure.  However, in the long run, “all of the projects” that are currently included in the CTF’s planning “must be implemented in the coming years,” he added. The minister said that the CTF had created a distinct readiness among German companies to start investing in a sustainable future that the ruling had now thrown “into limbo,” a situation that could not be sustained for a long time.

Hubert Aiwanger, energy minister from the Free Voters in Bavaria, said the ruling had hit the German economy “like a cold shower.” Many of the projects covered by the CTF were extremely important for making Germany’s economy fit for the future and remain competitive. “These are not nice-to-have projects, they are indispensable,” and planning security must be achieved. “We cannot do without it,” he stressed. The Bavarian minister warned against tactical moves along party lines, given the scale of the challenge. “This is a problem for the whole of Germany,” he argued.