Berlin, Dec 13 (EFE).- Germany’s governing coalition on Wednesday announced a deal for spending next year, ending a budgetary crisis triggered by a Constitutional Court ruling.
The deal will see 17 billion euros cut from the overall budget and leave the debt brake untouched.
The crisis surrounding the proposed budget was triggered after the Constitutional Court’s November ruling nullified the reallocation of 60 billion euros linked to the coronavirus pandemic to an extraordinary fund for economic reforms.
“My most important message is that the government is sticking to its goals: to drive the transformation towards climate neutrality, to strengthen social cohesion and to stand by Ukraine in its defensive struggle against Russia,” said Chancellor Olaf Scholz, who helms a three-way coalition government of Social Democrats, Greens and Liberals.
“Clearly we have less money to achieve these goals,” he admitted at a press conference, highlighting that “cuts and savings” would be needed.
After several weeks of intense negotiations, the chancellor appeared in Berlin on Wednesday alongside Deputy Chancellor and Economics Minister Robert Habeck, of the Greens, and Finance Minister Christian Lindner, from the Free Democratic Party.
The 17-billion euro hole in the 2024 general budget will be filled by eliminating “climate-damaging subsidies” as well as “spending cuts in various ministries,” Scholz said, without going into details.
At the same time, spending on the Climate and Transformation Fund (KTF), the controversial one-off fund at the center of the Constitutional Court’s decision, will be cut by 12 billion next year and by 45 billion until 2027.
The 17-billion euro cut will mean deficit targets for 2024 can be met and leave the debt brake – a mechanism under which borrowing is limited to 0.35% of GDP – intact, which was a red line for the Liberals.
Eight billion euros from the general budget will be spent on arms shipments and financial aid to Ukraine, plus 6 billion euros for Ukrainian refugees in Germany.
“If the situation on the front line worsens or others reduce their aid to Ukraine, we will have to react,” Scholz warned, explaining that the government could yet propose that the debt brake be lifted to allow more loans to be taken out.
Habeck explained that in order to boost state revenue, taxes on CO2 emissions would be raised and some subsidy programmes, including one for the solar industry, would be cut, but that this is “the price to pay” to maintain the “central pillars” of launching the green hydrogen industry, decarbonisation and boosting the transformation in the field of heating, he said.
Lindner welcomed the fact that it would be possible to “maintain the course of fiscal consolidation” and comply with the debt brake, but said that in view of the “unsatisfactory” economic development, “record investments” would be made to boost the economy.
The minister said “creative ways” would be used for those investments, for example by privatizing a subsidiary of the Deutsche Bahn railway company. EFE
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