The German government crisis ended thanks to the budget agreement

The German government crisis ended thanks to the budget agreement
German Chancellor Olaf Schulz

Noos News

The German government has reached an agreement on the budget. Last month, the government descended into a deep crisis when a Constitutional Court ruling put an end to the use of tens of billions of euros from the emergency fund for the Corona crisis.

The three government parties – the Social Democratic Party, the Green Party and the Free Democratic Party – faced the seemingly impossible task of agreeing to bridge this gap. After weeks of negotiations, they reached an agreement on the 2024 budget last night.

Climate pot

The Schulz government wanted to transfer 60 billion euros from the emergency pot for the Corona crisis to the climate pot. But the Constitutional Court ruled last month that this should not be allowed.

This had disastrous consequences, because plans and promises to spend this money were already in place. For example, the government announced billions in subsidies this year to attract chip manufacturers to Germany. There were also plans to use the money to mitigate high energy costs, both for energy-intensive industries and for citizens.

For the 2024 budget, this initially meant a gap of $17 billion. Although the interests of the government parties differ, they now seem to have found a way to bridge the gap. Details of the agreement will be announced this afternoon.

The legal action came from the opposition, the CDU, which is the collective name for the CDU and the Bavarian Christian Social Union. It was believed that, by diverting billions, the government was circumventing Germany’s “debt brake”: a law the country introduced after the financial crisis. This states that the government may not borrow more than it receives.

Germany could only borrow the money for the coronavirus pot because it provided an emergency debt relief exemption due to the pandemic. The union believes that, by switching, the government was circumventing the rules for this emergency exception.

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