The German Ministry of Finance decided to block the budget. This means the suspension of new financial expenditure for 2023.
Minister Christian Linder’s decision not to allow other ministries to enter into new obligations in the coming financial year is the result of the recently issued ruling of the Federal Constitutional Court. That was considered transfer of 60 billion euros by the government of Olaf Scholz from the fund to combat the consequences of the coronavirus pandemic to the Climate and Transformation Fund was unconstitutional.
Reuters has obtained a letter sent by State Secretary at the Ministry of Finance Werner Gatzer to other ministries and the Chancellor’s Office. The document indicates that in order to avoid burdens on future budget years, it intends to “block all available commitment funds in the mentioned parts of the 2023 budget with immediate effect.” In practice, this means that ministries will only be able to make payments ‘in specific individual cases’.
According to Reuters, the blockade also includes the Climate and Transformation Fund and a package worth 200 billion euros to counter the effects of rising energy prices. At the same time, as the Secretary General of the ruling SPD, Kevin Kuehnert, explains, the decision of the Ministry of Finance does not mean that the state can no longer spend money. The payment of benefits must be guaranteed, and the budget block only applies to commitments for future years.
A major challenge for Berlin
The ruling of the Federal Constitutional Court poses a real challenge for the government of Chancellor Olaf Scholz. Experts warn that the state’s financial plan for 2024, as well as Economic Stabilization Fund spending worth 165 billion euros, may be at risk.
“As in the case of the 2023 budget, the constitutionality of the draft budget for 2024 is currently not assured,” said Hanno Kube, head of the Public Law Department at the University of Heidelberg, in a letter quoted by the “Frankfurter Allgemeine Zeitung” daily .
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.