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Home Politics A világjárvány alatt megszavazott hitelek átcsoportosítását a német kancellár támogatja és védelmébe veszi.

A világjárvány alatt megszavazott hitelek átcsoportosítását a német kancellár támogatja és védelmébe veszi.

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Olaf Scholz, the German Minister of Finance, emphasized that the government’s support programs in recent years were indeed necessary to cope with the dual impact of the pandemic and the energy crisis.

The previous day’s announcement from the German Ministry of Finance, that all new expenses were frozen with immediate effect until the end of the year, came as a bombshell. The decision became inevitable due to the Constitutional Court’s ruling on November 15, which deemed it unconstitutional to transfer unused loans worth sixty billion euros from the extraordinary fund established during the coronavirus pandemic to the climate protection fund.

According to analysts, this could lead to the collapse of the coalition government led by Olaf Scholz’s Social Democratic-Green-Liberal alliance.

What are the rules regarding the budget?

During Angela Merkel’s tenure as chancellor, Germany introduced the so-called debt brake in the constitution. It determines the upper limit for new debt that the state can incur annually, which is 0.35% of the gross domestic product (GDP), in order to enforce budget discipline.

The introduction of strict spending limits was first seriously considered in the early 2000s, and the 2007-2008 financial crisis prompted action from the Berlin government.

The debt brake can be suspended in exceptional circumstances, but only with the approval of parliament. This was done between 2020 and 2022 due to the coronavirus pandemic and later the outbreak of the war in Ukraine, resulting in an energy supply crisis.

It was supposed to come into effect again this year, but due to the budget crisis, Finance Minister Christian Lindner announced last week that they planned to suspend the rule again.

How was the recent crisis caused?

On November 15, the German Constitutional Court invalidated the government’s decision to reallocate sixty billion euros originally intended to mitigate the negative consequences of the pandemic to climate change measures and the country’s modernization.

This amount was subsequently attached to the 2021 budget, but it turned out that it was not needed, so the Scholz-led government decided to transfer the funds to the climate protection fund. The segregated amount has not been used yet.

Representatives of the conservative Union parties argue that this is nothing more than circumventing the debt brake, so nearly two hundred people filed complaints with the Federal Constitutional Court.

The constitutional court ruled that this move was unconstitutional and the government needs to find another way to cover the deficit in the climate fund.

This could have a significant impact on projects aimed at supporting the green transformation of the economy and modernizing certain sectors.

How did the government react?

Immediately after the ruling, projects implemented through the climate protection and transformation fund were frozen, followed by virtually all new expenses until the end of the year.

The finance minister was forced to initiate the suspension of the debt brake again. When announcing this, he avoided using the term „debt brake” and instead talked about the introduction of an „additional budget” without further explanation. The details were later released by the ministry he leads.

Meanwhile, negotiations on next year’s budget were also suspended.

In her parliamentary speech on Tuesday, the chancellor emphasized that the large government support programs in recent years were indeed necessary to cope with the dual impact of the pandemic and the energy crisis.

„Germany has been rocked by serious and unpredictable external crises over the past two years. All of this has presented us with challenges that perhaps we have never experienced in such concentration and severity in the history of our republic,” she stated.

She stated that neglecting the modernization of the country’s industry, especially investments in chip production and battery manufacturing, would be an unforgivable mistake.

What are the broader consequences?

The crisis has sparked a debate on whether the rules of the debt brake should be relaxed, and questions have been raised about the future of the fragile three-party coalition.

While the Social Democrats and the Greens support easing the regulations, the Liberals are currently indicating that they would maintain budget discipline.

The opposition refers to it as a „political catastrophe,” and Markus Söder, the leader of the Christian Social Union (CSU), has spoken about the necessity of calling for new elections.

Prepared with the use of AFP reporting.

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