After the Karlsruhe verdict: Where is the “Plan B”? The traffic light has these options

Tuesday afternoon in Berlin. Christian Lindner is relaxed. The FDP finance minister says he has a plan B in his pocket, just one day before the big bang. “But I’m not going to speculate about whether I need it.” Everyone calm down – that’s the signal. We’ll know in 24 hours, says Lindner.

It is now clear: the worst case has arrived. The Federal Constitutional Court has declared the second supplementary budget for 2021 null and void. The money that was intended to combat the corona crisis must not be used for climate protection. The verdict tears a 60 billion euro hole in the state coffers. The attempt to simply move the money failed. The traffic light? Duped.

So where is plan B?

It’s not visible on Thursday either. There is initially a kind of spending freeze for the so-called Climate and Transformation Fund (KTF). Gain time until a solution is found: That now seems to be the motto of the traffic light management.

You’re always smarter in hindsight, of course. But it was clear for a long time that an emergency plan would be needed.

The public expert hearing in the House Budget Committee could have been a warning to the federal government. In January 2022, several experts questioned the constitutionality of the project. The Federal Audit Office, for example, considered the budget trickery to be “constitutionally dubious from several” aspects. Lawyers specifically warned that the plans in Karlsruhe could fail. Proponents of the delicate budget stunt ultimately prevailed. However, with a thin majority.

Economics Minister Robert Habeck was also aware of the catastrophe that could befall the coalition. Just a few months ago, on June 21st, he outlined the possible consequences of a successful constitutional challenge in the Bundestag. If Karlsruhe were to overturn the climate fund, “the floor would be pulled out from under us,” said Habeck. “If this lawsuit is successful, it would hit Germany really hard in terms of economic policy, probably so hard that we won’t pass it.”

Despite the early warning signals, the federal government now has 60 billion problems and apparently no idea how to proceed. There is no shortage of possible options. But each one of them harbors plenty of potential for conflict for the coalition, which is now literally spoiled for choice. An overview.

Option 1: Abolish the debt brake

A first variant for “Plan B” is an obvious idea, but politically far away: the abolition of the debt brake. This would mean removing a regulation that was only written into the Basic Law and the constitutions of the states twelve years ago as the result of a non-partisan Federalism Commission. It should stop the ever-increasing national debt at the expense of future generations. In the federal government, the debt brake generally allows minimal new borrowing; in the states, borrowing is prohibited.

The Greens and the SPD are most likely to imagine abolishing the debt brake, but the FDP is strictly against it. And even if all traffic light parties took part, the coalition would need a two-thirds majority in the Bundestag and Bundesrat. Union parliamentary group leader Friedrich Merz and CSU regional group leader Alexander Dobrindt have already made it clear that they are not available for this.

Option 2: Suspend the debt brake

So why not suspend the debt brake, like in the Corona years? “In the event of natural disasters or exceptional emergency situations,” the rules laid down in the Basic Law allow this. The traffic light majority in the Bundestag would be enough for such an exception – and the government would be able to make full use of it again. There are just two problems. First: This step also plunged the FDP finance minister into a credibility crisis because he made the return to the debt brake his core project. Second: The timing would be difficult to convey. An exception must be justified by economic hardship. And this should suddenly be available just after a slap in the face from Karlsruhe? Why not before?

Option 3: Reform the debt brake

More serious is the proposal to reform the debt brake itself, or more precisely: the legendary economic component. It determines whether the economy is foreseeably above or below potential and makes the scope for borrowing variable even within the debt brake: in normal situations it becomes slightly smaller and in worse situations it becomes larger. In the SPD, including the Greens, they believe that the formula for calculating this component from 2009 urgently needs to be revised and adapted to reality. Advantage: Can also be regulated with a simple majority in the Bundestag. Disadvantage: There would only be scope in the low single-digit billion range. And even this mini-reform would still be politically inflammatory, in a sense as Lindner’s next budget trick.

Option 4: Apply the red pencil

The savings option remains. Projects for which the climate fund was previously earmarked can be brought back into the normal budget. Logically, other projects would then have to be shortened or canceled. Example, purely theoretically: If there is no longer enough money in the KTF to promote the construction of charging stations for electric cars, the funds could be taken from the normal budget – and the basic child benefit could be cut. Or in labor market programs. Or in sports promotion. Or or or.

The 60 billion euro hole in the KTF therefore not only threatens climate protection projects, but ultimately all of the government’s benefits. Only one person appeared comparatively relaxed on Wednesday: “My money is secured,” the “Tagesspiegel” quoted Defense Minister Boris Pistorius (SPD) on Thursday. He has 100 billion euros at hand to better equip the Bundeswehr – as a special fund that was anchored in the Basic Law with the consent of the Union.

And how does it continue? Now “Plan P” applies

The coalition has apparently decided on option 5: wait and see. The Bundestag’s budget committee is scheduled to put the finishing touches to next year’s budget on Thursday and then decide on it a week later. The federal government announced a new economic plan for the KTF special fund; the federal ministries’ normal spending plans for 2024 are not affected by the ruling.

Experience has shown that the MPs will make a number of changes in the so-called adjustment session. The session therefore often lasts until late at night or even until the next morning. The Bundestag should then finally pass the budget draft during the week of the session from November 27th to December 1st.

Anyway, that’s, well, the plan.

Nevertheless, significant disruptions to the traffic light’s operation are to be expected. Immediately after the judge’s verdict from Karlsruhe, the SPD, Greens and FDP demonstrated unity so as not to further inflame the unfortunate situation. But did they have another choice? All the answers are still missing. The debate is just beginning. The Green Party conference is at the end of next week and the SPD conference is at the beginning of December. Dates that are now charged, where things could get heated. By the time the party meets, it will probably not be decided which turn the traffic light will take in the budget crisis. It may be tempting for the Greens and the SPD to put pressure on the government to press ahead with demands.

And the young people of the party don’t care much about the demonstrative unity. The Green Youth speaks of a “threat to democracy” with regard to Lindner’s financial policy. And the Jusos, the youth organization of the SPD, immediately pushed forward with a maximum demand. The judgment of the constitutional judges makes it clear “once again” that one has to choose between climate or debt brake, wrote Philipp Türmer on X.

Türmer wants to be elected as the new Jusos chairman at the federal congress this weekend. “All this trickery is of no use. The debt brake is fundamentally wrong. It has to be removed from the constitution,” he says. That would be the first variant of “Plan B”.

Finance Minister Lindner will appear before the Bundestag on Thursday afternoon. The Union requested a current hour after the Federal Constitutional Court’s ruling. There, Lindner continued to rule out tax increases, the federal government’s guidelines remained unchanged: “On the one hand, the debt brake, where we have new legal clarity, and on the other hand, the waiver of tax increases,” he said.

But something will change: “We will have to make more effective policies with less money than in the last decade.” It is not the income that is the problem, but rather the setting of priorities.

Lindner’s “Plan B” is now a “Plan P”.