Scholz promises new budget plans ‘very quickly’ amid German spending crisis

BERLIN — German Chancellor Olaf Scholz said Wednesday his ruling coalition would seek to present new budget plans “very quickly” to Parliament, after a constitutional court ruling last week plunged his government and its finances into disarray.

The chancellor is facing mounting criticism that he still hasn’t managed to offer a proposal on how to make up Germany’s yawning budgetary shortfall one week after the bombshell court ruling blew a €60 billion hole in the books.

It’s an accounting mess that now throws into doubt future payments for energy, the green transition of industry and microchip manufacturing.

Crucially, last week’s ruling means not only a delay to next year’s budget — which became evident on Wednesday when a parliament committee postponed a preliminary adoption of spending plans for 2024 — but may also require a supplementary “emergency” budget for this year to deal with the fallout of the court decision.

Speaking at a press conference with Italian Prime Minister Giorgia Meloni in Berlin, Scholz evaded specifics on what happens next, arguing the consequences of the ruling must still “be examined very carefully,” which should now be done “very swiftly and promptly.”

The Social Democratic chancellor argued his three-party coalition, which also includes the Greens and the liberal Free Democratic Party (FDP), was determined to “very quickly” move forward with new budget plans, and “ensure that what we have set out to do — for good cohesion in Germany, for the further development of our welfare state, for the modernization of our economy — can actually be pursued further.”

Still, he did not say where he could make the spending cuts that appear to be needed to make this possible.

Scholz had already sounded upbeat on Tuesday that, despite budget cuts, Germany could still pay subsidies to chipmakers Intel and TSMC for building new plants in eastern Germany.

A key consequence of last week’s ruling is that it will probably limit the ability of German leaders, both at the federal and state level, to use money from a variety of special funds that have been established to circumvent the debt brake. This mechanism restricts the federal deficit to 0.35 percent of GDP, except in times of emergency.

During a budgetary committee hearing on Tuesday, several legal experts argued Scholz’s government would have to present a supplementary “emergency” budget for this year to account for more than €30 billion of expenses for energy subsidies. These subsidies had been financed via a special fund outside the regular budget — a practice that is likely to be unlawful in the light of last week’s ruling.

Controversially, such a decision would probably require the suspension of the debt brake for this year.

Questioned by POLITICO during an event in Berlin on Tuesday evening, German Finance Minister Christian Lindner, who has expressed great pride about upholding the debt brake in the past, evaded making a clear reply on potentially relaxing debt rules for this year.

Lindner also argued the 2024 budget would be “a little less moderate and a little more restrictive.”