Senior coalition party members question German debt brake’s suitability for climate crisis

Leading members of Germany’s government coalition parties have questioned the sensibleness of the country’s limit on new government borrowing, the so-called ‘debt brake’, after a court ruling triggered the hasty reshuffling of expenditures and left a fund for climate and energy transition policies short of 60 billion euros. “I won’t deny that I consider the way in which the German debt brake is designed to be not very intelligent,” economy minister Robert Habeck from the Green Party told public broadcaster ARD in an interview. “It is very static and does not differentiate between funds that we spend as-we-go over the year and investments in the future that will only pay off in 10, 20, maybe 50 years’ time,” Habeck said. The rule that was enshrined in the constitution in 2009 was based on the assumption of having reliable access to cheap natural gas from Russia, that China is a buyer and supplier of German products and not a competitor, that the alliance with the U.S. was unshakeable and that there would be no more wars in Europe, he said. “These were the preconditions, and they seem to have changed,” he argued. Habeck added that declaring a new emergency, following that announced during the coronavirus pandemic, could be a possible remedy for the immediate blocking of funds, which the finance ministry on Monday evening made official. However, he said a change to the debt rules was not in sight, given the need for approval by the conservative CDU/CSU opposition alliance, which filed the lawsuit against the government’s budget plan.

The parliamentary leader of the Social Democrats (SPD), Rolf Mützenich, said the debt brake would have to be suspended at least during 2024, “maybe even longer.” In an interview with Stern magazine, Mützenich said the tasks that Germany is facing will not be finished next year, be it in climate, industry or security policy. “A few of the things that are currently happening lead to extraordinary emergency situations that escape the state’s control and considerably tighten the public budget,” he argued. Cutting social benefits, an austerity measure proposed by the pro-business coalition party Free Democrats (FDP), could undermine the foundation of Germany’s democracy and lead to another violation of constitutionally enshrined rules, he warned.

Debates within the coalition over the fallout of last week’s shock constitutional court ruling on Germany’s state budget borrowing rules are in full swing as the government still attempts to assess the court decision’s full impact on budgeting. A hearing in parliament’s budget committee on Tuesday, 21 September, was supposed to bring more clarity regarding the ruling’s immediate impact. The government said it would announce further response measures based on the meeting’s results.