Budget Crisis Looming for 2023 and 2024, Says CDU and Greens Coalition
In light of the budget decision handed down by Germany's Federal Constitutional Court, the black-green coalition is pushing for the state parliament to declare an exceptional situation for the fiscal years 2023 and 2024. Green parliamentary leader Lasse Petersdotter shared this information ahead of the state parliament meeting, stressing that it's not about seeking new loans but rather capitalizing on existing emergency loans as per the agreed arrangements. This move would facilitate financing necessities through emergency loans in 2023 and 2024.
CDU and Greens remain steadfast in their commitment to allocate up to 137 million euros from the Ukraine emergency loan to fund the planned Northvolt battery factory in Dithmarschen district. The Green politician advocates changing the debt-brake legislation enshrined in the German Constitution, stating that it no longer fits the current crisis-ridden times.
Just a few days ago, the Federal Constitutional Court in Karlsruhe barred the reallocation of coronavirus loans for climate protection and industry modernization purposes.
The CDU and Greens' proposed state parliament declaration of an emergency situation would permit the government to tap into existing emergency loan funds for budgetary requirements in the coming years, as reiterated by Green parliamentary leader Lasse Petersdotter. Regarding the Northvolt battery factory, Petersdotter assures the coalition is dedicated to delivering the promised funds of 137 million euros from the Ukraine emergency loan.
Behind the Scenes
The coalition's push for a budget emergency declaration is largely motivated by the challenges stemming from the ongoing energy crisis and the residual effects of the COVID-19 pandemic. Here are the key factors that are driving this:
- Economic and Financial Struggles
- After the monumental economic dip caused by the COVID-19 pandemic in 2020, the German economy demanded substantial measures to sustain it, involving both supply- and demand-side steps.[1]
- The ongoing energy crisis, with its causes ranging from natural disruptions to exogenous shocks, has further burdened the economy, necessitating active support from the government to stabilize economic processes.[1]
- Debt Brake Exemptions
- The German Federal Constitutional Court has laid down stringent conditions for declaring an extraordinary emergency situation, which includes a noticeable negative impact on the state's financial health and a clear causal link between the emergency situation and new debt.[1]
- The Court has acknowledged that the COVID-19 pandemic constitutes an emergency situation under public debt law, leading to a financial constraint for the state.[1] However, the Court notes that medium or extended developments, such as the gradual accumulation of government debt, cannot trigger an extraordinary emergency situation.[1]
- Financing Consequences
- The declaration of a budget emergency would open up the possibility for additional borrowing to address the crisis; however, these borrowings must meet specific requirements, including a notable impact on the state's financial situation and a causal link between the emergency situation and the new debt.[1]
- The implications for projects like the Northvolt battery factory are complex. Though the construction of the Heide, Germany-based factory is not directly impacted by the creditor protection dispute surrounding the Swedish parent company, the broader economic and financial context could impact funding availability and stability.[2][5]
- The German development bank KfW has extended a loan of approximately 600 million euros to boost the Northvolt battery factory, but this loan is part of a larger political and financial spat involving the federal government and the state of Schleswig-Holstein.[2]
- Political and Legal Consequences
- Declaring a budget emergency carries substantial political and legal implications, including sharper legal clarity in the application of debt brake regulations and the scaling back of special funds to their constitutional and political roles.[1]
- The decision would also echo ongoing political and legal debates concerning fiscal policy, with the legislature's powers of review and judgement subject to judicial scrutiny.[1]
