Political consequences of the German Constitutional Court's verdict

The Federal Constitutional Court's decision on the German debt brake has thrown the 2024 federal budget into disarray.

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Dr. Ralph Solveen

Commerzbank Economic Research

November 16 2023

The Federal Constitutional Court's decision on the German debt brake has thrown the 2024 federal budget into disarray, and there is still no consensus within the government on how to plug the resulting budget holes. A change to the debt brake is unlikely to receive the necessary approval from the CDU and CSU. As the FDP is unlikely to support the additional debt or higher taxes proposed by representatives of the SPD and the Greens, the hole will probably have to be closed largely by cutting planned expenditure if the coalition is to survive.

A good week after the Federal Constitutional Court's (FCC) decision to declare the second supplementary budget for 2021 null and void, the coalition of the SPD, Greens and FDP is struggling with the consequences of this ruling. This is all the more true as the view has prevailed that this does not only affect the credit authorizations for the Climate and Transformation Fund (KTF). Rather, this also applies to expenditure from the much larger Growth and Stabilization Fund (WSF) and some other smaller special funds. This is because the federal government did not want to count the expenditure planned for these funds in the coming year against the debt brake, as they had already been granted credit authorizations in previous years or had received funds from the federal budget. However, this was precisely what the FCC criticized. At least with regard to the WSF, the federal government also seems to see it this way.