Government applies for emergency: Corona fund unconstitutional

COVID-19 Pandemic: Saxony-Anhalt Government Pursues Emergency Loan Approval

As the economic fallout from the COVID-19 pandemic continues, the state government of Saxony-Anhalt has requested the state parliament to declare an extraordinary emergency situation. This move would grant them the authority to keep borrowing without going over the debt ceiling, as outlined in a motion for discussion at the upcoming parliamentary meeting. The state government argues that this situation warranted proactive measures to tackle future crises, and therefore plans to implement around 60 projects over the course of several years.

These projects aim to enhance resilience against future crises. Key areas of focus include modernizing emergency services equipment, modernizing hospital facilities, integrating digital assistants into the classroom setting, and improving financial aid for those in need. Initial plans involved allocating funds for these projects from a €1.98 billion Corona Fund. However, had Finance Minister Michael Richter informed the parliamentary finance committee, this fund would be deemed unlawful due to lacking sufficient legal capacity.

In response to this conundrum, the government plans to fund these projects using annual loans. To facilitate this, the recognition of an emergency situation is pivotal. The government's request for emergency status recognition in 2024 also indicates that approximately €580 million of the initial funds have already been used or planned, with 2023 needs estimated at €630 million, and expenses of €760 million projected for 2025 - 2027. Managing such costs may require significant cuts, including streamlining investments and subsidies, as well as reductions in benefits.

Richter emphasized the state government's application for emergency status recognition during his address on the 2021 special fund. At this juncture, the state parliament is expected to deliberate on the motion, thus potentially approving the necessary emergency loans to finance the aforementioned initiatives.

Additional Reading

• The Federal Constitutional Court will investigate the Corona Fund's constitutionality, in line with Richter's assertions.
• Germany's federal government has offered statements on the Corona situation and its impact on Saxony-Anhalt's finances.
• Richter claimed that the Corona special fund's constitutionality is compromised due to lacking legal capacity.
• The state parliament's impending discussion topics include the acknowledgement of an emergency situation, which would bolster the state government's capacity for loan acquisition, enabling them to expand their debt ceiling.
• Household budgets had to tighten due to the economic fallout of the coronavirus crisis nationwide.
• If the emergency situation is recognized, the likelihood of the state parliament approving the emergency loans strengthens, maintaining financial support for the aforementioned measures, with a focus on digitalization and enhanced healthcare infrastructure.
• The black-red-yellow coalition government will channel funds intended for digitalization and hospital improvements through separate loans, given the controveries surrounding the Corona Fund.
• Critics pose concerns that substantial investments intended to mitigate crisis impact may jeopardize the state's finances, while neglecting essential priorities like social welfare and infrastructure development.

Insights

1. Legal challenges pose threats against some pandemic responses in Germany, including the Bundesnotbremse (emergency brake), which the Federal Constitutional Court later upheld but later rejected a general vaccine mandate for all adults.
2. Measures targeting digitalization and hospital improvements are crucial, but their implementation may be impacted by broader pandemic management issues and legal scrutiny.
3. The state government's commitment to sustainable financial practices aligns with its sustainability strategy and adherence to its ESG framework, supporting the issuance of its €500m ten-year social bond, emphasizing responsible financing.

Enrichment data suggests that legal challenges to pandemic-related measures have emerged in Germany. While the specific constitutionality of Saxony-Anhalt's Coronavirus fund isn't mentioned, the broader context implies that such legal challenges could potentially affect the state's ability to implement and finance crisis-related measures. However, the extent of such impact is contingent on the nature of the legal challenges and resolution methods.