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Scholz Pledges Swift Budget Overhaul After Top Court Slapdown

2023-11-15 20:17
German Chancellor Olaf Scholz said his government will take Wednesday’s decision by the Constitutional Court fully into account
Scholz Pledges Swift Budget Overhaul After Top Court Slapdown

German Chancellor Olaf Scholz said his government will take Wednesday’s decision by the Constitutional Court fully into account and quickly make the necessary changes to its budget policy.

The court in Karlsruhe ruled that the shifting of €60 billion ($65.2 billion) in debt authorizations earmarked to tackle the Covid-19 pandemic into an off-budget fund violated rules that restrict new borrowing. Judges said that the scope of the so-called Climate and Transformation Fund, which in August was topped up to €212 billion for the period 2024 through 2027, must now be reduced by €60 billion.

Speaking alongside Economy Minister Robert Habeck and Finance Minister Christian Lindner in Berlin, Scholz acknowledged that the judgment will have a significant impact on budget policy at both the federal and regional level.

He pledged to swiftly overhaul the fund, known as KTF, including passing a temporary measure to make sure that funds are not spent that have not been properly accounted for.

“We are immediately drawing our own conclusions and initiating our own measures,” Lindner told reporters. The €60 billion in unused credit authorizations will be canceled, he added.

Read More: Germany’s Top Court Strikes Down €60 Billion Climate Funding

The court ruling creates a huge challenge for the ruling coalition’s budget planning and potentially threatens spending on projects like the rollout of heat pumps or the expansion of electromobility and hydrogen infrastructure.

Cash from the fund is also earmarked for investment in the nation’s rail network and in building out semiconductor production, including €10 billion in subsidies for a new Intel Corp. plant in the eastern city of Magdeburg.

“If this means that obligations already entered into can no longer be met, the legislator must compensate for this in some other manner,” Doris Koenig, vice president of the court, said in delivering the ruling.

--With assistance from Karin Matussek, Verena Sepp and Laura Malsch.