Economist: Suspending the debt brake requires an emergency situation
Economist Veronika Grimm has criticized calls for the debt brake to be suspended following the Federal Constitutional Court's budget ruling. "Suspending the debt brake by emergency rule requires an emergency situation. This is difficult to argue," the "economic sage" told the Funke Mediengruppe newspapers. SPD leader Saskia Esken had previously called for the debt brake to be suspended for 2023 and 2024, arguing that there was a "continuing crisis situation".
On Wednesday, the Federal Constitutional Court ruled that the use of coronavirus loans for climate projects was unconstitutional. The ruling tears a 60 billion euro hole in the financing of climate projects.
Grimm said that the Karlsruhe ruling was "a drastic cut and hopefully a turning point". A first step must be to realign climate policy. The leading instrument must be emissions trading. This would create clear incentives for households and companies to protect the climate, "at no cost to the state". Climate protection is "a long-term transformation task that will take decades. We have to act sustainably in terms of fiscal policy, otherwise we will experience sovereign debt crises in Europe long before the climate is saved," said Grimm.
The economics professor called on the traffic light government to cut state aid. Too many subsidies had been provided. "Households that can afford it don't need to be subsidized to replace their heating system." Energy-intensive companies should be supported in tackling the transformation to climate neutrality. "But we shouldn't stop the structural change with relief measures."
- Despite the SPD leader's call for suspending the debt brake in 2023 and 2024 due to a continuing crisis situation, economist Veronika Grimm asserts that such a move requires an actual emergency situation, as suspending the debt brake involves federal government intervention.
- In the context of addressing climate finance, economist Grimm suggests that focusing on emissions trading as a leading instrument can provide clear incentives for both households and companies to contribute to climate protection, without imposing excessive financial burden on the federal government or causing potential sovereign debt crises.
- Amidst calls for reducing state aid due to fiscal concerns, economist Grimm advocates for targeted support for energy-intensive companies in their transition to climate neutrality, dismissing the notion that relief measures should halt the necessary structural change.
Source: www.dpa.com
