The budgetary crisis must encourage Germany to escape from hypocrisy

Ethunderous crisis that Germany has been going through since November 15. Because she did not respect the strict rules that she set for herself, the largest economy in the euro zone finds itself in a situation of budgetary blockage, forced to freeze spending, unable to vote on its finance law for 2024, after recognizing that that of 2023 was probably unconstitutional. Never since its formation just two years ago has Olaf Scholz’s government been faced with such a crisis of credibility. The shock is so severe that the very survival of the coalition is at stake.

How could Germany, which so readily presents itself as a model of budgetary virtue, get to this point? As often in the past, the earthquake was triggered by the Constitutional Court in Karlsruhe. In a historic ruling, on November 15, judges censored a controversial financial maneuver who had played a central role in the formation of the tripartite coalition led by Mr. Scholz, in the fall of 2021. The Social Democratic Party (SPD), the Greens and members of the Free Democratic Party (FDP) had sealed their union on the transfer of an unused credit of 60 billion euros, originally voted to fight against the consequences of Covid-19, to a “transformation and climate fund”, off-budget.

The political agreement was based on the following bases: the fund offered sufficient resources to finance, over several years, the decarbonization and economic transformation measures desired by the Greens, without burdening the social reforms expected by the SPD. All while respecting the constitutional principle of the “debt brake”, which limits the annual structural deficit of the federal state to 0.35%, dear to the FDP. The “transformation and climate fund” in question has become the government’s preferred investment tool, from the renovation of the railway network to the replacement of gas boilers, to a grant of 10 billion euros for a chip factory in Magdeburg, Saxony-Anhalt (East).

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The use of this type of special fund, outside the budget, proved so attractive that the government increased it, creating a special fund for the army, then a fund of 200 billion euros to deal with the energy shock of fall 2022. The budgetary controversies within the government – ​​on the reception of refugees or support for Ukraine – were thus softened by funds which circumvented, without uming, the “debt brake “.

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