Germany will fail to pass 2024 budget this year – The Post

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The leader of the Social Democratic Party in the German Parliament, Katja Mast, announced on Thursday in an internal message to the members of her party that the German government will not have time to approve the financial law for 2024 this year: it is not unsolvable. the problem and the news are not completely unexpected, but for a country like Germany, which is Europe’s largest economy and has a reputation for respecting economic restrictions, it is still quite an unprecedented situation. But it certainly damages his government’s image and is emblematic of the difficulties in cooperation that the three parties that support the coalition led by Social Democrat Olaf Scholz have.

A bit like Italy, in Germany the financial law is what the federal government decides how much money to spend in the following year and how to spend it. The German constitution states that the government can continue to deal with current problems without approving a budget, but this means freezing any new spending: the government can only pay for basic services such as pensions and other social benefits.

It is very likely that this situation will not last long: Mastová herself stated in a message to her party colleagues that the German government should agree on the budget for 2024 by the end of the year, only that there will not be enough time for it to be approved by the parliament, and therefore the approval postponed until the beginning of the new year.

The non-approval of the finance law is due to a hole of 17 billion euros in the coverage of measures that the government wanted to introduce next year. In other words, the governing parties had to decide what to cut in order to spend 17 billion less, but so far they have not succeeded.

The coalition supporting the German government consists of three main parties: the Social Democratic Party (SPD) of Chancellor Scholz, the Liberal Party of Finance Minister Christian Lindner and the Green Economy Minister Robert Habeck. The three parties often have different and conflicting priorities, which was well demonstrated on this occasion: for example, the Greens and Social Democrats would not want to give up subsidies to support the transition to renewable energy and to build microchip and battery factories in Germany; the liberals, on the other hand, are not convinced of these investments and would give them up without much trouble.

The crisis began in November when Germany’s constitutional court, responding to a lawsuit by the center-right opposition, declared the 2023 and 2024 budget illegal because it violated a German law that prevents the state from borrowing beyond a certain limit. In essence, the court stated that the government approved large investment plans (mainly related to energy transformation and technological development) illegitimately using emergency funds that were not spent during the period of the coronavirus pandemic and the war in Ukraine.

The decision of the Constitutional Court therefore opened a budget hole of 45 billion euros for 2023 and 17 billion for 2024, which caused huge problems in the government, which set out to find a solution. The $45 billion hole was covered almost immediately, stipulating that 2023 should also be considered an emergency year and therefore legitimate to use emergency funds. For the 2024 hole, the €17 billion hole, Liberal Lindner instead refused to do the same, arguing that there was insufficient justification to designate 2024 as an emergency year: so the government suddenly found it had €17 billion to do so. be cut off from the financial company.

In absolute terms, they would not be many, considering that the German annual budget is around 450 billion euros. However, the 17 billion related to some investment projects that the government considers strategic, such as those for energy transformation, and giving them up is therefore quite problematic.

After criticism in the final days of negotiations, members of the majority tried to minimize conflicts within the coalition and the effects of postponing the finance law until next year. For example, Lindner said that “this is not a crisis”, adding that he understood that “coalition allies have very ambitious agendas”. The Finance Minister also said that a major agreement between the parties would be reached within a few days.

If an agreement were to be absent for much longer, the stability of the government in 2024 would be in real jeopardy. Not to reach it completely would be to cause its downfall: an option that is not in the interest of any of the three allies.

– Read also: The German government screwed up its public debt

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