The Federal Government is tackling the supplementary budget for 2023 in a special meeting, with an additional debt of approximately 45 billion euros on the table. This necessitates suspending the debt brake in the Basic Law, a rule that prohibits new debt exceeding 0.35% of annual economic output. The Bundestag is scheduled to give approval to the bill, and if successful, it could be put forward in the Bundesrat by December 15 for further discussion.
In recent years, the need for significant investments in climate and energy programs has put the debt brake under scrutiny. In fact, a court ruling by Germany's highest court in November 2023 declared an integral part of the outgoing coalition government's funding plan for climate and energy programs unlawful. This ruling highlighted the need for reform of the debt brake, as a majority of citizens prefer investments in areas such as climate, defense, or infrastructure over maintaining the debt brake.
Industry representatives, civil society groups, many cities, economic advisors, and state governments have also weighed in, warning that adhering to the debt brake could severely impact their ability to navigate current challenges. If reforms are made, the budget could see substantial changes, including an increase in public works project expenses and social security expenditures.
The defense budget could also experience a significant boost to meet NATO's goal of spending at least 2% of GDP on defense. This could mean increasing the budget from around €50 to €80-€90 billion or more, depending on the level of spending required to meet NATO's goals.
In essence, the Federal Council's special session aims to address the supplementary budget 2023, taking into account public opinion, the need for investment in various areas, and potential consequences on the overall budget and spending priorities.
