[1/2]German Chancellor Olaf Scholz, along with Economy and Climate Minister Robert Haveck and Finance Minister Christian Lindner, spoke out against Germany’s Constitutional Court’s ruling that the government will transfer 60 billion euros ($65 billion) of unused pandemic-era debt to Germany. commented on. … Obtaining license rights
BERLIN, Nov 24 (Reuters) – German Chancellor Olaf Scholz on Friday sought to reassure frightened citizens and investors following a court ruling in Europe’s largest economy, in a video message. He promised to finalize the 2024 budget by the end of this year. Spending plan.
The Scholz administration has frozen most new spending commitments after the Constitutional Court last week declared unconstitutional a plan to reallocate pandemic funds to green projects and industrial subsidies, erasing billions of dollars from the federal budget. I had no choice but to do it.
“In light of the ruling, we will carefully revise next year’s budget, swiftly and with the necessary caution,” Scholz said in a video posted on social media X.
Scholz said the government will ask Congress to lift the debt brake that limits structural deficits to 0.35% of gross domestic product (GDP) to secure the aid planned for this year.
The Prime Minister is expected to make a statement to Parliament on the issue next Tuesday.
Finance Minister Christian Lindner appears to lack confidence that the 2024 budget will be adopted again this year, given that the government has a “very ambitious roadmap”. He said he didn’t know.
Government sources said the Free Democratic Party (FDP) and its three-party coalition partners, the Green Party and the Social Democratic Party, will hold a party conference that will likely make it easier to reach an agreement on a budget in mid-December.
The court’s decision cast doubt on Germany’s traditionally strict fiscal policies and prompted warnings that German companies may lack support to remain globally competitive.
Germany’s debt is by far the lowest in the G7, but memories remain of how frugality paved the way for post-war reconstruction, and how much it cost to reintegrate debt-laden former communist East Germany. , which has created a unique political culture of debt avoidance. .
FDP leader Lindner, a fiscal hawk, said the government needed to rule out tax increases and find savings elsewhere, backed by reforms to the welfare state, to continue supporting industry.
Next week, he is scheduled to remove restrictions on voluntary borrowing and present a supplementary budget for fiscal 2023.
Lindner said in an interview with newspaper Handelsblatt that the need for consolidation is in double digits.
Germany’s electricity and gas price caps, for example, will expire at the end of 2023 and will not be extended until March 2024, radio station Deutschlandfunk (DLF) quoted him as saying in an interview scheduled to be broadcast on Sunday.
The debt brake was introduced after the 2008/09 global financial crisis, but was first suspended in 2020 to help governments support businesses and health systems during the coronavirus pandemic.
Mr. Lindner had been reluctant to end the mechanism because of his party’s strong emphasis on fiscal discipline, but he relented because he felt the budgetary chaos would further burden Mr. Scholz’s fractious three-way coalition.
held hands
This crisis has led to increasing calls for reform of the debt brake. Economy Minister Robert Habeck of the pro-spending Green Party criticized it as inflexible and blocking vital support for industry that would prevent jobs and value creation from being moved offshore.
To a standing ovation at the Green Party conference, Habeck said that times have changed from “when climate protection wasn’t taken seriously, war was a thing of the past and China was our cheap workbench”. He questioned whether the debt brake could be applied.
“With the debt brake in place, we are voluntarily going into a boxing match with our hands tied behind our backs,” he said.
But government spokesman Steffen Hebestreit said on Friday that reforms that would require a supermajority in parliament were not on the immediate agenda.
A poll by broadcaster ZDF found that only a minority of Germans supported suspending the debt brake.
About 57% want to make up for the budget shortfall caused by the court ruling with spending cuts, 11% support tax increases and 23% want the state to take on additional debt.
Reporting by Holger Hansen, Christian Kremer, Miranda Murray and Rene Wagner. Written by Matthias Williams.Editing: Toby Chopra, Gareth Jones, Deepa Babington
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