Budget verdict: “Setback in climate protection” and “Slap” on traffic lights

Budget 2021 interrupted
“Giant slap” on traffic lights: Union welcomes budget verdict – harsh criticism from environmentalists

Alexander Dobrindt, CSU regional group leader

© Kay Nietfeld/DPA

Despite the debt brake, the federal budget for 2021 was increased by 60 billion euros – the money was allocated to climate protection. Karlsruhe now declares the maneuver unconstitutional. Reactions to this are mixed.

The Federal Constitutional Court ruled that the federal government cannot use funds intended to combat the coronavirus crisis for climate protection. The amendment to the supplementary budget for 2021 is unconstitutional, Germany’s highest court announced on Wednesday in Karlsruhe. This is about the effectiveness of the debt brake, said the presiding judge of the Second Senate, Doris König, in the announcement. The Union faction in the Bundestag successfully sued against redistribution. (Ref. 2 BvF 1/22)

The government factions in the Bundestag are prepared for the scenario, said the parliamentary manager of the SPD parliamentary group, Katja Mast. She initially sees no direct impact on the 2024 federal budget timeline. “At this point, I assume we will still pass the budget on December 1st and that the cleanup meeting will take place as normal tomorrow.” At this meeting, the Budget Committee will make final changes to the 2024 budget.

Reactions to the verdict are mixed. Although the Union is pleased with the news from Karlsruhe, climate and environmental activists express massive criticism.

“Relief” and blunt criticism of Karlsruhe’s budget decision

CSU regional group leader Alexander Dobrindt sees the verdict as a “gigantic slap” to the traffic light coalition. “The traffic lights are blowing up your dubious budget policy,” Dobrindt told the Bavarian media group newspapers. The government took “billions that it should not have touched to finance its left-green castles in the air”, criticized Dobrindt.

The court has now ended its “policy of cheating”, CSU general secretary Martin Huber told newspapers. Huber warned that all traffic light budget planning was no longer applicable. “Whoever is unable to establish a budget that complies with the constitution is incapable of governing. The traffic light has failed in every aspect,” continued the CSU politician.

The Union’s parliamentary secretary, Thorsten Frei (CDU), expressed his relief with the verdict. “Karlsruhe enters the parade at the traffic lights,” Frei told “Spiegel”. “If the ‘traffic light’ had escaped with its diversion maneuver, it would have caused serious damage to the financial system,” he added.

However, massive criticism comes from climate and environmental organizations. According to the environmental organization Greenpeace, the verdict represents a “serious setback for climate protection”. “Now the fact that the traffic light wants to pay for the climate-neutral restructuring of the economy with financial policy sleight of hand is now having its revenge,” complained the managing director of Greenpeace Germany, Martin Kaiser. Loans, new taxes and the reduction of climate-damaging subsidies must no longer be taboos.

Kaiser called on Chancellor Olaf Scholz (SPD) to use his political authority in the face of the climate crisis. «Because we are already in the middle of the climate crisis. Loans, new taxes and dismantling climate-damaging subsidies must not be taboos.” The budget needs a better balance between military spending and more climate protection, as well as new socio-ecological instruments in financial policy.

“Wirtschaftsweiser”: Possible limitation of damages

For Norbert Walter-Borjans, the ruling shows the “extreme design failure of the debt brake”. The former SPD leader and former finance minister of North Rhine-Westphalia told “Spiegel”: “It is a brake on the future because it prevents necessary investments. If the government tries to get around this through the back door, the situation budget will be confused.” Karlsruhe is now providing clarifications, the ruling requires clean regulation. “The government has to clean up here,” Walter-Borjans said.

However, “economic sage” Achim Truger also sees opportunities here to limit the damage. “The verdict is a blow to the bottom of the book for the federal government. The climate and transformation fund must be cut by 60 billion euros,” said socio-economist Truger from the German Press Agency. “But there are still pragmatic ways to limit the damage.”

The cleanest and most fundamental solution is debt brake reform. “We could, for example, stipulate that after a crisis we will only have to gradually return to the debt rule,” Truger suggested. It is also possible to continue to use the debt reduction exception rule and declare an emergency for several years because families continue to be affected. Alternatively, Truger suggested compensating for the lack of revenue in the budget through a temporary energy or climate solidarity measure.

Emergency money was converted into climate funds

Due to the emergency situation during the corona pandemic, the federal government subsequently increased the 2021 budget by 60 billion euros in the form of a loan authorization. In these exceptional situations, it is possible to take out loans despite the debt brake.

In the end, the money was not needed to deal with the pandemic and its consequences. The federal government made up of the SPD, Greens and FDP therefore wanted to use the money for the so-called climate and transformation fund and, with the approval of the Bundestag, redistributed it retroactively in 2022. 197 members of the Union parliamentary group in the Bundestag presented legal action in Karlsruhe because, in his opinion, the debt brake was being circumvented in this way.

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