Traffic lights in trouble: is climate protection in danger?
It's a slap in the face for the German government: 60 billion euros in firmly planned loans may not be used for climate protection.
The Federal Constitutional Court declared the reallocation of funds in the 2021 budget to be unconstitutional. Finance Minister Christian Lindner (FDP) reacted immediately: subsidies from the special climate fund are on hold for the time being. Only the aid for the long-fought-for heating replacement and for climate-friendly homes is to flow. Climate and environmental activists fear a major setback for their cause. However, the ruling by Germany's highest court could have further consequences for the budget policy of the federal and state governments.
What kind of money was involved?
The ruling concerns a maneuver in the 2021 federal budget, when an exception to the debt brake was made to combat the coronavirus pandemic, allowing the federal government to take out loans. As these were not needed in full, the Ampel government shifted the funds to the Climate and Transformation Fund - a special fund that is economically separate from the rest of the budget and is used to pay for investments for more climate protection. The reallocation did not take place until 2022 - retrospectively for the previous year's budget. The CDU/CSU complained against this and criticized the Federal Government for circumventing the debt brake in the Basic Law. It was using a trick to fill its pockets with money in advance.
What did the Federal Constitutional Court decide?
The highest German court agreed with the CDU/CSU in principle. The supplementary budget violated the exception rule of the debt brake. The traffic light government had not conclusively explained what the corona crisis, i.e. the reason for the borrowing permitted in emergencies, and the climate programs had to do with each other. In addition, loans taken out in emergencies cannot simply be used indefinitely without being counted towards the debt brake. And finally: The decision had come too late. A supplementary budget would have to be passed before the end of the year.
What does this mean for the use of the funds?
The 60 billion euros were already firmly earmarked in the Climate and Transformation Fund (KTF) - and are now no longer there. After the ruling, Lindner deleted the credit authorizations, i.e. the permission to take out the loans. However, the pot is not completely empty. "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," wrote Marcel Fratzscher, President of the German Institute for Economic Research (DIW). The government has set clear priorities: In any case, subsidies for the replacement of old oil and gas heating systems are to be paid in the coming year. The funding programs for climate-friendly new builds and home ownership subsidies for families are also not affected by the freeze, emphasized Construction Minister Klara Geywitz (SPD).
And from 2025?
The situation looks critical. The federal government wants to draw up a new economic plan for the KTF quickly. It should then become clear whether programs will have to be dispensed with or whether they will at least be significantly weaker. Program expenditure of at least 211.8 billion euros was actually planned for the KTF until 2027.
Green parliamentary group leaders Britta Haßelmann and Katharina Dröge emphasized that the programmes are "extremely important for climate protection, relieving the burden on citizens and a sustainable economic policy". They are at the heart of government policy. Greenpeace fears a major setback for climate protection. "The fact that the traffic light government wanted to pay for the climate-neutral restructuring of the economy with fiscal sleight of hand from the outset is now taking its revenge," complained the environmentalists. WWF Germany warned: "Saving the climate and biodiversity must not fail because of the debt brake."
Which climate protection projects could be affected?
The Climate and Transformation Fund, a special fund alongside the budget, has become the government's all-purpose weapon in recent months. It contains programs for more climate protection, for the establishment of future technologies and the development towards a climate-neutral economy. Citizens and companies are relieved of the burden of electricity prices from the fund. There is a purchase premium for electric cars. Further funds will flow into the hydrogen economy and the expansion of railroads. State subsidies for the establishment of large semiconductor factories such as that of the US chip manufacturer Intel in Magdeburg also come from the KTF. Research into climate-neutral flying and climate-friendly shipping is also funded.
Are there still ways out so that nothing has to be cut?
The judges in Karlsruhe stated: "If this means that obligations already entered into can no longer be met, the budget legislator must compensate for this elsewhere." Economists have also already expressed ideas on how the federal government could get more money. The cleanest, fundamental solution would be a reform of the debt brake, said Achim Truger, an economist. "For example, it could be regulated that after a crisis, the debt rule only has to be gradually reintroduced." The President of the Munich Ifo Institute, Clemens Fuest, believes it is conceivable that new debt could be limited to net investments.
Truger also suggested continuing to make use of the debt brake's exemption rule and declaring an emergency situation for several years, as budgets would still be affected. Alternatively, the lack of revenue could be compensated for by levying a temporary energy or climate solidarity contribution.
All of these proposals could be new explosives for the traffic light coalition. For one thing, programs that are particularly important to the Greens are at stake. In addition, attitudes to the debt brake differ widely: Chancellor Olaf Scholz (SPD), Lindner and his FDP are outspoken fans, while the Greens and also the SPD as a party have repeatedly called for a reform of the rule.
Will the ruling have even more far-reaching consequences?
That is currently being examined. It could have a fundamental impact on the budgetary policy of the federal and state governments, said Scholz. This concerns the handling of debt-financed special funds in general. "This is the end of all shadow budgets, at least those that are debt-financed," said CDU/CSU parliamentary group leader Friedrich Merz. The federal government currently maintains 29 special funds with debt possibilities amounting to several hundred billion euros. The CDU/CSU believes that at least the 200 billion euro special fund for the energy price brakes is affected.
- The Federal Constitutional Court's ruling could impact the budget policies of both the federal and state governments, as they often utilize special funds, like the Climate and Transformation Fund, to finance climate protection initiatives.
- Olaf Scholz, the Chancellor, and Christian Lindner, the Finance Minister, are advocates of the debt brake, but the Green Party and the SPD within the traffic light coalition have regularly called for its reform.
- Following the court's decision, the 60 billion euros earmarked for climate protection projects in the Climate and Transformation Fund are no longer available.
- The suit against the government was filed by the CDU/CSU, who criticized the Ampel coalition for allegedly circumventing the debt brake to fill its coffers in advance.
- The Federal Constitutional Court agreed with the CDU/CSU, stating that the supplementary budget violated the debt brake exception rule due to an lack of a clear link between the corona crisis and climate programs.
- The CDU/CSU leader, Friedrich Merz, declared that the ruling marks the end of all debt-financed shadow budgets, potentially affecting several hundred billion euros in special funds that the German government maintains.
Source: www.dpa.com
