Germany, shaken by court ruling, finally has a budget

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Nearly a month after a court ruling left a hole in Germany's 2024 budget, the Berlin government unveiled a new spending plan that included cuts to programs to address climate change but confirmed its commitment to provide $8 billion. euros ($8.6 billion) in direct military aid. to Ukraine.

The new budget will comply with constitutional rules against the acquisition of new debt, the government said.

“We are advancing the climate-neutral transformation of our country. We are strengthening social cohesion. And we stand alongside Ukraine in its defense against Russia,” Chancellor Olaf Scholz said Wednesday morning.

“However, it is clear that we will have to make do with much less money to achieve these goals,” he added.

Cuts were made to a fund to help companies adopt more environmentally friendly practices and subsidies for electric vehicles and solar energy were reduced. Promised subsidies for a new semiconductor factory will be maintained.

Announced before lawmakers went on vacation on Friday, the spending plan came after prolonged and arduous negotiations that had threatened to break up the government's three-party coalition. Lawmakers have yet to vote on the plan, but it is expected to pass because the coalition has a majority in parliament.

Germany's budget crisis began four weeks ago, when the country's top court ruled that the government had violated the constitution by transferring a 60 billion euro special fund created to deal with the Covid pandemic emergency. in a “climate and transformation fund”. German law sharply restricts government borrowing above certain limits, unless the money is for emergencies. While the pandemic was deemed an emergency, the court said ministers could not use the money for other purposes.

The money had been planned for 2023 and 2024. To keep this year's budget within the law, the government said rising energy costs caused by Russia's war in Ukraine constituted an emergency. But that designation would not apply to next year's budget, leaving a deficit of 17 billion euros.

That highlighted differences between coalition partners: the Greens seeking money to spend on climate transformation; social democrats who want additional funding for social security payments; and the liberal FDP party, which wanted to avoid tax increases and preserve subsidies for those who commute by car. Christian Linder, FDP leader and Finance Minister, seemed ready to start 2024 without a budget.

The crisis has taken a political toll on a government that had faced criticism for other reasons. According to a recent national poll, only 19 percent of respondents thought Scholz was suitable for the chancellor position. And the leader of the Conservative party, who has criticized the government's handling of budget issues, demanded that Scholz face a vote of confidence when parliament returns in 2024.

While there was some criticism of the budget agreement from business groups, many agreed that it was important to finally have a budget.

“It is good and important that the federal government has reached an agreement,” Bertram Kawlath, vice president of the VDMA, an industry association for mechanical engineers, said in a statement. “The weeks of uncertainty have passed, clearing the way for important investments,” he said.



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