audit court warns of "social risk" associated with black and red budget plans

The Federal Audit Office Slams Union-SPD Debt Package: "A Financial Risk" for Germany

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Germany's Union and SPD parties are pushing for a massive multi-billion-dollar investment package to pass through the parliament. However, even the Federal Audit Office isn't convinced. The plan, they claim, would escalate Germany's debt dynamics significantly, with potentially devastating consequences for the national budget.

The Federal Audit Office's audit report critiques the financial package, stating that the proposed bills would intensify the federal government's debt dynamics. The issue stems from the proposed aid for defense spending, relief for the states, and the establishment of a 500 billion euro credit-funded special fund.

These changes, according to the report, would delay the long-overdue consolidation of the federal budget, leading to long-term, high-interest expenses. Not only would this impose severe limitations on the normal budget's flexibility, but it also poses an economic and social risk. Therefore, the audit office advocates for a comprehensive consolidation plan, urging defense and security policy core tasks to be financed from current revenues while adhering to the debt rule.

The Rejected Special Fund for Infrastructure Investments

The potential interest expenses arising from the Union and SPD's plans could reach up to 25 billion euros annually, according to the report. Under these plans, additional debts of over one trillion euros could be accumulated within the next decade, in addition to the existing federal debts totaling 1.7 trillion euros. These possible interest burdens were calculated based on the estimates.

The Federal Audit Office suggests that defense spending be exempted from the debt brake only above a certain GDP percentage, not 1%, as planned by the Union and SPD. The Greens had proposed a value of 1.5%. Instead of the proposed exemptions, the audit office prefers the FDP's plan to expand the existing Bundeswehr special fund.

The special fund for infrastructure planned by the Union and SPD is negated by the audit office. They argue that financing public infrastructure should be considered a core and permanent task to be covered by current revenues. Furthermore, the plans pose a risk of shifting investments from the core budget to the special fund and using the freed funds for consumption purposes.

Criticisms of the Special Fund and Co-Financing of State Tasks

The Federal Audit Office also cautions against co-financing state tasks, as it could create additional debt possibilities for the states. Violating EU stability rules is also a concern. The audit office asserts that investments should meet at least the "criterion of additional value" or have a certain reference value for the total sum of investments.

Source: ntv.de, spl/AFP

Fiscal policy - Debt brake - Federal Court of Audit - EU stability rules

The Federal Audit Office has warned that the proposed employment policy, included in the union-SPD debt package, could strengthen Germany's debt dynamics and pose an economic and social risk, urging a comprehensive consolidation plan.
The Federal Audit Office has stated that the fiscal policy, as proposed by the union-SPD, with its employment policies, could result in high-interest expenses, reaching up to 25 billion euros annually, and potentially accumulate additional debts of over one trillion euros within the next decade.
The Federal Audit Office has advised against the establishment of a special fund for infrastructure investments, as it poses a risk of shifting investments from the core budget to the special fund and using the freed funds for consumption purposes, violating EU stability rules and creating additional debt possibilities for the states.