Budget Adjustments: The "Traffic Light" Coalition Stands by Climate Goals and Ukraine Support
Following the Federal Constitutional Court's budget ruling, Chancellor Olaf Scholz stated that the government would have to make do with less money. However, the coalition remains determined to pursue its primary objectives, such as climate-neutral restructuring, social cohesion, and ongoing support for Ukraine.
This preceding week, Scholz, Economics Minister Robert Habeck (Greens), and Finance Minister Christian Lindner (FDP) collaborated on finding a solution, which they considered as demanding but productive work. The result is a democratic agreement that incorporates a mix of cost-saving measures and subsidy reductions.
Habeck revealed that the CO2 price would escalate to the 45 euros per tonne level planned by the previous administration in 2024, which is a 5-euro increase compared to the initial plan. This change is intended to strengthen the country's commitment to combating climate change.
Lindner pointed out environmental subsidies would be reduced by 3 billion euros, while a further 1.5 billion euros in savings are expected in the labor market, specifically through improvements in refugee placement services in Ukraine.
The Climate and Transformation Fund (KTF), used to finance energy-transition projects, faces a 12.7-billion-euro reduction in the subsequent year, with an eventual 45-billion-euro cut by 2027, according to Scholz. Despite these cuts, the Chancellor emphasized that the fund would still maintain a substantial total volume of 160 billion euros.
One such individual measure is the modernization of the railroads no longer being financed via the KTF. The coalition opted for a creative approach and plans to utilize privatization funds from unwanted federal shares to bolster the railways, as per Lindner.
The Federal Minister for Family Affairs, Lisa Paus (Greens), expressed optimism that her department would be unaffected by cuts, allowing continued funding for the Children and Youth Plan and other related projects.
In response to the situation in Ukraine, the federal government is not considering suspending the debt brake for the upcoming year. However, Scholz did not rule out a future suspension if Ukraine's military or financial conditions experienced a significant deterioration.
An assessment of the debt rule exemption for addressing the flood disaster in the Ahr valley is being considered, with credit ceilings potentially raised to 2.7 billion euros for the coming year. Lindner suggested that this sum would not pose a threat to the budget's stability and that they would engage in discussions with the CDU/CSU parliamentary group to establish legal certainty.
However, the CDU/CSU parliamentary group leader, Friedrich Merz (CDU), criticized the coalition's adherence to the debt brake, predicting an imminent suspension by mid-2023 at the latest. Merz accused Scholz of deceitful tactics, while the AfD leader Tino Chrupalla and Left Party leader Janine Wissler labeled the coalition's budget measures as counterproductive.
