Finance Minister Christian Lindner said Wednesday’s ruling by Germany’s top court curbing the use of off-budget special funds marks a “turning point” for finance policy that means the government will be forced to set stricter priorities when allocating spending.
While it’s too early to identify the full impact of the 62-page judgment, the ruling has “provided new clarity” about how to apply rules restricting net borrowing known as the “debt brake,” Lindner said Thursday in a statement to the lower house of parliament in Berlin.
“We don’t have a revenue problem, but we have had the problem of setting priorities for many years,” Lindner told Bundestag lawmakers. He was speaking during a raucous session to debate the ruling called by the main opposition conservatives, who filed the court challenge.
“All of this is possible with existing revenues without resorting to new debt or higher taxes if we clarify our priorities,” said Lindner, a fiscal hawk who insisted on the restoration of the debt brake after it was suspended to help deal with the pandemic and the energy crisis. “In this respect, this ruling can only be an opportunity.”
In a case brought by the CDU/CSU alliance, the Federal Constitutional Court ruled that repurposing some funding earmarked for the Covid-19 pandemic violated Germany’s debt rules.
Read More: German Ruling Puts €770 Billion of Government Funds at Risk
Judges said that the €60 billion ($65.2 billion) in untapped credit authorizations can’t be transfered into the government’s Climate and Transformation Fund, known as the KTF, potentially threatening projects like the expansion of hydrogen infrastructure and charging stations for electric vehicles.
More generally, it has prompted fears that similar off-budget vehicles accounting for as much as €770 billion in funding may have to be dissolved or at least overhauled.
The ruling also disrupted the passage of next year’s federal budget, which was due to be signed off by parliament’s budget committee this week.
Approval for Lindner’s 2024 finance plan, which further trims net borrowing, is now due to happen next week before it goes to a vote in both houses by the end of the year.
Lindner said that the government has taken “immediate action” to implement the court’s ruling, including canceling the €60 billion in debt authorizations.
The KTF has been frozen for the time being and the ruling coalition is working on a revised financing plan, he added.
