BERLIN — German Finance Minister Christian Lindner signaled Thursday that the government will seek to suspend the country’s debt brake in the aftermath of a constitutional court ruling that has plunged the country into a severe political and budgetary crisis.
“There is now new legal clarity on how we have to deal with special assets and emergency loans,” Lindner said in a short statement to reporters. “We will now put expenditure, particularly for the electricity and gas price brakes, on a constitutionally secure footing.”
Germany’s constitutional court ruled last week that a government plan to repurpose €60 billion left over from an emergency COVID-19 fund to finance the ruling coalition’s green agenda was unconstitutional. But the ruling also has far wider implications that limit the government’s ability to draw from a variety of special funds created to circumvent the country’s constitutionally enshrined debt brake, which restricts the federal deficit to 0.35 percent of GDP, except in times of emergency.
That ruling has now forced the government to retroactively include more than €30 billion of spending for an energy price brake — which had initially been financed through a special fund outside the regular budget — as part of its regular spending. As a consequence, the ruling has all but forced the German finance ministry to suspend the debt brake by declaring an emergency.
Linder said he would present a draft supplementary budget for 2023 at a cabinet meeting on Wednesday. The government will propose a resolution to the German parliament to declare “an extraordinary emergency situation,” he later added in a post on social media site X.
“No new debt will be incurred, but only the funds already used to overcome the crisis will be placed on a secure legal basis,” said a finance ministry spokesperson.
This would be the fourth year in a row that Germany has suspended the debt brake, which was introduced in 2009. In previous years, the government declared emergencies due to the pandemic as well as the spiraling energy costs that came in the aftermath of Russia’s full-scale invasion of Ukraine.
The budgetary crisis sparked by last week’s court ruling has deeply embarrassed Germany’s left-leaning, tripartite coalition government, opening it to accusations that it has attempted to create a veneer of fiscal discipline while finding creative ways to finance ambitious — and expensive — projects to accelerate the country’s green transition and relieve customers and industry from the impact of high energy costs.
The embarrassment is particularly acute for Lindner, the conservative leader of the Free Democrats, who sought to present himself as the coalition government’s fiscal hawk, providing a check on left-leaning largesse even as he has consented to ambitious spending programs based on the use of special funds.
As the government now grapples with the consequences of the constitutional court’s ruling, it has been forced to freeze new spending and delay approval of next year’s budget.
Some in Germany’s ruling coalition are now calling for a reform of the debt brake to allow governments more financial wiggle room. On Thursday, Greens Economy Minister Robert Habeck called for a “contemporary update” of the fiscal rule.
In order to suspend the debt brake, a majority of lawmakers in the German parliament must agree, though such a move could potentially lead to another legal challenge.
