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

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

After the verdict, Chancellor Olaf Scholz (SPD) announced that he would “closely observe” the new budget guidelines. It is conceivable that the ruling will result in “a very profound change in budgetary practice,” said Scholz in the Bundestag plenary session. “There is no need to rush into action, but rather a careful examination.” However, the ruling has no impact on the schedule for the adoption of the 2024 federal budget.

Reactions to the verdict are mixed. While the Union is satisfied with the news from Karlsruhe, climate and environmental activists are expressing massive criticism.

Reactions to the budget verdict: Between “relief”…

CSU regional group leader Alexander Dobrindt sees the verdict as a “gigantic slap” for the traffic light coalition. “The traffic lights are blowing up their dubious budget policy,” Dobrindt told the newspapers of the Bavaria media group. The government took “billions that it shouldn’t have touched in order to finance its left-green castles in the air,” Dobrindt further criticized.

It became even clearer CSU boss Markus Söder. After the federal government’s serious bankruptcy before the Federal Constitutional Court, he sees the end of the traffic light’s reign as coming. It was a bad day for the ability to govern in Germany and a disaster for the coalition of the SPD, Greens and FDP, said the Bavarian Prime Minister on the sidelines of a state parliament meeting in Munich. “And actually this means that any legitimacy to continue governing is gone. Basically, a government cannot continue like this.”

The court has now ended their “cheating policy,” CSU General Secretary Martin Huber told the newspapers. Huber warned that the entire budget planning of the traffic light was no longer applicable. “Anyone who is incapable of setting up a budget that conforms to the constitution is incapable of governing. The traffic light has failed across the board,” the CSU politician continued.

The Union’s parliamentary secretary, Thorsten Frei (CDU), also expressed relief at the verdict. “Karlsruhe drives into the parade at the traffic light,” Frei told “Spiegel”. “If the ‘traffic light’ had gotten away with its bypass maneuver, it would have caused serious damage to the financial system,” he added.

…and clear criticism

After the verdict, the Green party leaders Britta Haßelmann and Katharina Dröge underlined the importance of the affected programs. “The programs of the Climate and Transformation Fund are extremely important for climate protection, relief for citizens and a sustainable economic policy. They are at the core of this coalition’s policy,” said the politicians in a joint statement on Wednesday. The parliamentary group leaders announced that the consequences of the judgment would be carefully examined and that the decision of the Federal Constitutional Court would of course be observed.

After the verdict, the Green Youth attacks Finance Minister Christian Lindner (FDP). “This day shows that Christian Lindner’s adherence to the debt brake is a danger to our democracy, but also to the entire planet,” said co-chair Svenja Appuhn star. “There can only be a good future without the debt brake.” Appuhn is calling on the federal government to suspend the debt brake in the short term and to initiate “massive investments for climate protection and democracy.”

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

Kaiser called on Chancellor Olaf Scholz (SPD) to use his policymaking authority in the face of the climate crisis. “Because we are already in the midst of the climate crisis. Loans, new taxes and the dismantling of 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”: Damage limitation possible

For Norbert Walter-Borjans, the judgment shows the “extreme design flaw of the debt brake”. The former SPD leader and former NRW finance minister 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, it makes the budget situation confusing.” Karlsruhe is now providing clarification, the judgment requires a clean regulation. “The government has to clean up here,” said Walter-Borjans.

However, the “economic wise man” Achim Truger also sees opportunities to limit the damage here. “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 of the German Press Agency. “But there are still pragmatic ways to limit the damage.”

The cleanest, fundamental solution is a reform of the debt brake. “You could, for example, stipulate that after a crisis you only have to gradually return to the debt rule,” suggested Truger. It is also possible to continue to make use of the debt brake exception rule and to declare an emergency for several years because households continue to be affected. Alternatively, Truger suggested compensating for a lack of income 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 such 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, redeployed it retroactively in 2022. 197 members of the Union parliamentary group in the Bundestag sued in Karlsruhe because, in their view, the debt brake was being circumvented in this way.