For German companies, the ruling—and the resulting loss of urgently needed investments in the transformation of the economy—poses a major problem. There is now a shortfall of at least 60 billion euros in the budget planning starting in 2024. The federal government faces the decision of either scaling back planned support programs and climate subsidies accordingly or raising the funds through other means.

Another problem is that the 200-billion-euro Economic Stabilization Fund (WSF) could also be affected by the ruling. According to the Federal Constitutional Court’s ruling, funds from emergency loans must always be used in the same year. By that measure, all loan authorizations in the ESF will have expired by the end of 2022.

The ESF has also allocated energy assistance for consumers and businesses for the year 2023 (totaling 43.2 billion euros, including interest, at year-end). Since expenditures for 2023 can no longer be covered by the credit authorizations approved in 2022, a “Supplemental Budget Act for 2023” was adopted by the Federal Cabinet via a written procedure at the end of November, and corresponding loans were taken out for the WSF.

There is also a need for adjustments in the federal states, insofar as state special funds are financed by emergency loans.

Urgently Prioritize Expenditures

For the federal government and public budgets as a whole, the Federal Constitutional Court’s decision significantly alters the fiscal policy framework. This must have consequences for the spending behavior of public budgets.

However, blanket spending freezes are not a suitable long-term solution. They create even greater uncertainty for businesses. Policymakers must now urgently prioritize issues and expenditures, as the BDI has long advocated. They must also ensure sustainable financing for a necessary ramp-up of public investment and transformation investments.

The 2023 supplemental budget, including borrowing authorizations, is intended to retroactively place the financing of expenditures for the WSF and the 2023 Flood Victims Fund on a secure legal footing by invoking the debt brake’s emergency clause. Further corrective measures must cover the 2024 budget, the KTF, the WSF, and all other special funds of the federal and state governments affected by the ruling (excluding the Bundeswehr Special Fund).

Tax increases and additional levies are the wrong way to close the funding gap. In Germany, labor and capital are already heavily taxed. Intergenerational equity also argues against placing the entire burden of the transformation on the current generation of workers; rather, future generations should share in the burden.

Background

Due to the COVID-19 pandemic, the federal government made use of the debt brake exemption in 2020–2022: As part of this, the 2021 federal budget was retroactively increased by 60 billion euros via a borrowing authorization to combat the consequences of the pandemic. However, this money was not drawn down. Instead, the federal government intended to use the credit through a transfer to the KTF for climate protection and the modernization of the economy in future fiscal years. The KTF is used to finance support programs for, among other things, electric mobility and investments in rail or the building sector. The Federal Constitutional Court (BVerfG) declared this second supplementary budget for the 2021 federal budget null and void.