The problems of the Government of Chancellor Olaf Scholz in carrying out the 2024 budgets are getting worse. The Budget Committee of the Bundestag has canceled with 24 hours notice the vote on the Government’s draft for next year’s federal budget and the accompanying budget financing law. A new date has not yet been set. The background is the decision of the Federal Constitutional Court on the 2021 supplementary budget, which was declared null, thereby triggering a long chain of doubts about the constitutionality of subsequent budgets. In fact, the 2023 budgets are unconstitutional and the plans for 2024 are “extremely concerning.”
The main reason is the violation of the annuity principle: debts must be recognized in the year in which they are incurred and not in the year in which credit authorizations are transferred from the budget to a special fund. This happened with the Climate and Transactions Fund (KTF) created in 2021 with the 60,000 million euros in credits contracted at the time to combat the effects of the coronavirus pandemic. The Economic Stabilization Fund (FEE) is also seen affected. It was filled with credit authorizations worth 200 billion euros in 2022. The Government intended, among other things, to stop the rise in electricity prices. However, the actual debt was not subscribed on the capital market until 2023. Therefore, according to the new rules of the Constitutional Court, the debt does not have to be recognized in 2022, but in 2023. The point is that the 2023 federal budget already foreseen some 45,000 million euros of debt, as much as the debt brake allows, including the economic component). Now that the debt is also due to be recognized in 2023, the debt brake has been violated and the budget is therefore unconstitutional. The opinion of the jurists summoned to the Bundestag this Tuesday to analyze the situation created by the ruling is unanimous in agreement on this.
Faced with the cloud that has formed, the budgetary policy spokespersons of the coalition’s parliamentary groups, Dennis Rohde of the Social Democratic Party ((SPD), Sven-Christian Kindler of the Greens, and Otto Fricke, of the liberals of the FDP, They announced this Wednesday in a joint statement the cancellation of the vote. They want to respond “carefully” to the “great challenge” posed by the ruling and “prepare a budget that takes into account all its arguments.” They also wanted to give the opposition “sufficient time for parliamentary deliberations before some selections are finally debated in the Budget Committee”.
In fact, the Commission had wanted to vote on the draft budget for 2024 and the Budget Financing Law this week and submit it to parliamentary approval on December 1. The mountain of questions now open will not, however, be resolved overnight, although for the Greens and the SPD the unconstitutionality of the 2023 budgets could be corrected with an emergency declaration that would justify an exception to the debt brake and the 2024 with some editorial changes.
An emergency situation within the meaning of the Basic Law was the coronavirus pandemic and the energy crisis caused by the Russian war in Ukraine, but, to make sense, the resulting economic crisis could also fit, which may well last longer than the event that triggered it. It is not that easy, because each action has its consequences. A problem for the Executive is that if a more lasting crisis is alleged, the Bundestag would have to resort to “repeated annually declarations” of the emergency situation or, in other words, the Government could only finance short-term measures with “helicopter money”, but not long term. “That would not create stability of expectations for investors,” says Michael Hüther, of the German Economic Institute, warning that, if policy proceeds in that direction, “we face a persistent investment crisis.”