Crisis-mired Germany to blow through debt limit

BERLIN — Germany will seek to suspend a constitutional debt limit for a fourth straight year, its finance minister said on Thursday, after a shock court ruling upended government spending plans and sparked a budget crisis.

"The federal government will present a supplementary budget to constitutionally secure the expenditures made this year," Christian Lindner said on social media.

Along with the new fiscal plan, the government would put a resolution to parliament declaring an "exceptional emergency situation", the legal basis for suspending the debt rule, he said.

Germany's top court last week said Chancellor Olaf Scholz's government had broken the constitutional debt rule by transferring money earmarked for coronavirus pandemic support to a fund to fight climate change.

The ruling left Berlin with a 60-billion-euro ($65 billion) hole in its budget and threw sorely needed investments into doubt.

Following the decision, the government suspended most of the projects being financed through the climate fund and imposed a broad spending freeze for the rest of this year.

Written into the Constitution in 2009 under then-chancellor Angela Merkel, the debt brake caps new borrowing in Europe's top economy to 0.35 percent of its GDP.

The brake was suspended from 2020 to 2022 during the pandemic and energy crisis, but was set to come back into force this year.

Bitter pill

Suspending the debt rule again will be a bitter pill for the coalition of the Social Democrats, Greens and pro-business FDP, which had pledged to reapply the constitutional brake this year.

The often-criticized commitment to balanced budgets has become a symbol of Germany's fiscal prudence.

Lindner said he would present the new budget for 2023 next week to "clear the decks" before "we can talk about 2024 and the next few years".

The supplementary budget would be worth 40 billion euros, bringing Germany's total deficit to 85 billion euros this year, German weekly Der Spiegel reported.

The total included money already largely paid out to help households and businesses tackle soaring energy prices, Der Spiegel said.

The government this week delayed a planned vote on the budget for next year, while it reviewed the court's ruling. MPs were set to have their final vote on the budget next week.

The ruling had already fueled tensions in Scholz's uneasy coalition, at odds over how best to spend its resources, analysts said.

Agencies Via Xinhua