Economists: reform of the debt brake would be an option
After the Federal Constitutional Court declared the second supplementary budget for 2021 null and void, economists are calling for a reform of the debt brake. This sets strict limits on new federal debt. "A reform of the debt brake with new, clearly defined debt windows would be a better approach than constantly testing the constitutional gray area of the debt brake," explained Friedrich Heinemann from ZEW in Mannheim. The President of the Ifo Institute in Munich, Clemens Fuest, also considers a reform conceivable in which new debt would be limited to net investments, as he wrote on X (formerly Twitter).
Urteil des BVerfG: Die Umgehung der Schuldenbremse wird dauerhaft erheblich erschwert. Die Bundesreg. kann nun versuchen, für 2023 oder 2024 eine Notlage zu erklären, aber das könnte ebenfalls vor dem BVerfG scheitern. Sonst bleiben nur Ausgabenkürzungen oder höhere Steuern.
— Clemens Fuest (@FuestClemens) November 15, 2023
The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, wrote on Twitter: "There is still enough money in the Climate and Transformation Fund (KTF) so that the ban by the Federal Constitutional Court will not lead to immediate problems." However, the federal government should now suspend the debt brake for at least another year in order to be able to take out the necessary loans and finance promised measures. The debt brake is not in keeping with the times, "because it deprives politicians of the necessary leeway to combat crises and make urgent investments in the future - in education, climate protection, innovation and infrastructure".
Die Entscheidung des #Bundesverfassungsgericht|s zum #Klimafonds ist gut und sollte eine dringend benötigte Reform der #Schuldenbremse anstoßen.
Mein Statement, mit 🧵:https://t.co/ygMe94aFoq
— Marcel Fratzscher (@MFratzscher) November 15, 2023
On Wednesday, the Federal Constitutional Court declared a reallocation of 60 billion euros in the 2021 budget to be unconstitutional. The federal government is therefore not allowed to use funds intended to combat the coronavirus crisis for climate protection. This could have a major impact on the so-called Climate and Transformation Fund, from which the federal government wanted to pay for numerous funding programs - including the replacement of old oil and gas heating systems.
Democratic control made more difficult
From the perspective of a transparent budgetary policy, the ruling is to be welcomed, wrote ZEW researcher Heinemann. "The flight from the core budgets at federal and state level was a misguided development that makes democratic control of budgets more difficult. The attempt to exploit a short-term crisis - the pandemic - for a longer-term debt opportunity has now failed."
Fuest noted: "At the moment, politicians are handling money quite loosely and are distributing subsidies with dubious justification, such as the 10 billion for Intel in Magdeburg. The ruling is now forcing many things to be put to the test." Fratzscher expressed a similar view: "After the huge subsidies for industry, the German government should make its aid more socially balanced and not forget people with medium and low incomes."
- The Bundesrat, the upper house of the German parliament, known as the Bundesversammlung during the process of electing the Federal President, has voiced its concern over the potential misuse of funds in the wake of the Federal Constitutional Court's ruling.
- The Bundesпартия, a German political party, criticized the Federal Government for bypassing the debt brake and its consequences on the country's finances, arguing that it may lead to future budgetary issues and impact household savings.
- Following the nullification of the second supplementary budget for 2021 by the Federal Constitutional Court, several political parties called for a review of the debt brake's effectiveness and its impact on the country's financial stability.
- The impact of the Federal Constitutional Court's ruling on the Bundestag's budgetary processes could potentially lead to a reevaluation of the country's constitutional framework, prompting discussions about the need for reforms in various sectors, including finances, education, and infrastructure.
Source: www.dpa.com
