German Chancellor Olaf Scholz (L) and German Finance Minister Christian Lindner talk prior to German-Italian government consultations at the Chancellery in Berlin, Germany, 22 November 2023.EPA-EFE/FILIP SINGER


Germany to suspend debt brake amid budget crisis


Germany’s traffic-light coalition Government intends to rescue its 2023 budget – by taking on additional debt.

To do so, the cabinet will first have to temporarily lift the constitutionally mandated debt limit. After that, it can continue discussing the budget for next year.

Federal Minister of Finance Christian Lindner announced that he will present the draft supplementary budget for 2023 to the cabinet in the week starting November 27.

The goal is to legally protect loans that have already been given out for energy price subsidies.

“There is now clear legal guidance on how we should manage special funds and emergency loans,” Lindner said.

“We will now put spending, particularly on the brake on electricity and gas prices, on a constitutionally sound basis.”

Apparently, his task was to “clear the air” before discussing the 2024 budget.

The next budget cannot be discussed until there is a “constitutionally secure situation” for 2023, he said.

On November 22, the Government imposed a moratorium on virtually all new expenditure within the 2024 budget.

The removal of the debt brake means the Government accounts can go deep into the red in a bid to save costly coalition programmes.

The debt brake is a fiscal rule that was enacted in 2009 in Germany and written into the Constitution. It is designed to restrict structural budget deficits at the federal level and limit the issuance of government debt.

According to latest information from the German finance ministry, an additional sum of around €45 billion will be made available.

The lion’s share of this money will go to energy expenditure, as the Government is working on the “energiewende” – the ongoing transition by Germany to a low carbon, environmentally sound, reliable and affordable energy supply.

Berlin chose to spend heavily on “green energy” via a climate fund that was financed with money from COVID pandemic-related debt.

The highest court in Germany declared on November 15 that this transfer of debt was illegal.

That decision blew an immediate hole in the budget worth up to €60 billion.