Their tasks have never been easy, but this time it looks like squaring the circle. The members of the Budget Committee are meeting, tomorrow Thursday, to close the last outstanding issues and to present to the Plenary for a vote the final plan for 2024. But after the historic decision of the Constitutional Court of Karslouris, it will not be possible, because how is it possible to plan spending for the next year with money that is forbidden by the supreme constitutional lawmaker to allocate… why don’t they just allocate it? The problem takes on wider dimensions because there are financial commitments in the current 2023 budget as well.

The sack of Aeolus opened

The constitutional legislator relied on the basic principles of preparation, implementation and execution of a budget. In this particular case, he ruled that the resources of the Climate and Green Economy Transformation Fund under formation are subject to the rules of annual duration (Jährlichkeit) and cannot be used after the expiration of the year. That is, budget fiscal acts must refer to a specific fiscal year that begins on January 1 and ends on December 31 and cannot be moved to another fiscal year and used for another purpose, unless there is an emergency. Following this, the supplementary budget of 2021, amounting to 60 billion with resources from the Economic Stabilization Fund amounting to 200 billion euros to deal with the financial consequences of the pandemic, cannot be implemented because it violates the Constitution.

With this decision, of course, Aeolos’ bag was opened. According to the constitutional requirement, the 2023 budget should also be unconstitutional, or at least those financial provisions that are covered with resources amounting to 37 billion from the Stabilization Fund, which, it should be noted, was decided by the coalition government in September 2022 and characterized by the chancellor himself as the “heavy artillery” to deal with the pandemic crisis.

Of course, no one has yet appealed to the Constitutional Court for the current budget, but yesterday the Ministry of Finance, with its circular, froze the budgets of individual ministries as a precaution with the exception of the Special Fund of 100 billion euros for the modernization of the German armed forces, which is expressly provided for by the Constitution, as well as the budgets of the constitutional bodies, such as the Presidency of the Republic, the Parliament, the Federal Council and the Federal Constitutional Court.

This means in practice that pending charges in all individual ministries are frozen so that, according to the intention of the Ministry of Finance, their budget for the following years will not be burdened in advance.

It is worth mentioning by way of example that section 60 of the current budget provides resources from the Climate Fund and the Economic Stabilization Fund in order to reduce energy prices for consumers after the war in Ukraine. It is obvious that after all these chain developments the government is for the first time since assuming power under such pressure, not only among the government partners, who express different opinions about the appropriate handling, but also from the opposition.

And now what;

This is the problem. Can the members of the Budget Committee approve the draft budget for 2024 as if nothing had happened? The chairman of the opposition Christian Democratic Party, Friedrich Merz, called for cuts. Speaking last night on the Maischberger program on the first channel of public television ARD, he proposed to close the budget gap to abolish the basic child allowance (Kindergrundsicherung), the heating law (Heizungsgesetz) and the increase of the minimum social allowance (Bürgergeld). “Not everything is done,” Mertz emphasized, noting that the 12% increase predicted at the end of the year for the minimum social allowance violates the wage gap requirement and constitutes a “brake for the entire economy.”

Also, the introduction of the basic child benefit with the huge bureaucratic costs it entails, is currently “pure madness”. But the planned heat pump subsidy will also lead to “huge costs” for the public sector. Friedrich Merz, however, clearly stated that he is against the increase in taxes. “Germany is a country with high taxes and we must not overdo it.” But he also doesn’t think the debt brake should be eased. “For now, I don’t see that we need to move towards the debt brake.”

In the light of the developments, the way out of easing the debt brake, which will be implemented again from next year, does not seem to be so taboo anymore, it may even be a one-way street. But it would have to be shown to be done due to an emergency in order for it not to be ruled unconstitutional. Yesterday’s hearing of invited economists at the Budget Committee emphasized the impact on the economy from the pandemic and now the “new shock” from the war in Ukraine. Economists, such as Henning Tape, consider that the Constitutional Court left a lot of room for maneuver in this direction. What he advises is to invoke the argument that the health effects of the pandemic may be over but not the economy. Another difficulty is that constitutional judges will have to be convinced that this also applies retroactively.

Pressure on Chancellor Olaf Solz is intensifying. “He should come out and say what went wrong,” Axel Schaefer from the Social Democratic Party told Süddeutsche Zeitung. Others in his party are wary of whether the coalition government will survive this crisis as well, with the Greens insisting on all green investment from the Climate Fund, as Economy and Environment Minister Robert Hambeck said. and the Liberals to want to keep social spending, which currently represents 40% of the budget, but without suspending the debt brake. Squaring the circle.

And while economic factors are painting the effects of all these developments on entrepreneurship, productivity and employment, everything indicates that the government’s timetable for passing the budget for 2024 will not stay within the year. This at least emerges from leaks in the K.O of the Liberals, the party that has assumed responsibility for the country’s finances.

“It wouldn’t be a problem for the Liberals if we needed a few more weeks to thoroughly review everything and prepare the 2024 budget according to the new requirements,” Christon Meyer, a budget expert without to quote the price. “Following the decision of the Federal Constitutional Court, the question is to make the 2024 budget legally secure.” He apparently meant safe from the fiscal tyranny of his party president and finance minister Christian Linder.