The German coalition government of Chancellor Olaf Scholz agreed, after a tense debate between the three parties that form it, that it will not suspend the constitutional debt brake in 2024, a possibility that was being considered to redirect the budgetary mess triggered by a ruling of the Constitutional Court. If it had been suspended, it would have been the fifth consecutive year to use an option that the liberals reject and that the Social Democrats and Greens considered this time again necessary or at least acceptable.
Result: to balance public accounts for next year, it will be necessary to “reprioritize areas of spending” – Scholz said at a press conference in Berlin – which is equivalent to cuts, although several initiatives by environmentalists are maintained, although not all of them. . Scholz stressed that, for example, some of the so-called “harmful climate subsidies” (such as the price of plastic containers or agricultural fuels) will be reduced, as well as certain federal incentives, but that in the social sphere they will not be They will cut benefits. The amount to be saved is 17,000 million euros on a budget of 450,000 million.
After the agreement, this year there is no longer time to carry out the parliamentary procedure to approve the budget, which will materialize in the Bundestag (lower house of Parliament) in the first week of January, according to Scholz.
The Minister of Economy, the Green Robert Habeck, had a dejected face, while the Minister of Finance, the liberal Christian Lindner, looked euphoric. The debt brake, which limits new public debt to 0.35% of annual GDP and which can be suspended only in the event of a demonstrated emergency, is one of the pivots of the liberal FDP party.
The brake was suspended in 2020, 2021, 2022 and 2023 due to covid, the energy crisis and the recent adverse ruling by the TC on a relocation of debt acquired from one year to the next. Having managed not to suspend the brake is a triumph for the liberals, and a disappointment for the greens.
