Debt brake suspended again: Germany set to accrue 80 billion USD in new debt amid constitutional crisis
The root of Germany's problem lies in a 2021 decision. At that point, the government moved 60 billion euros (approximately 68 billion USD), derived from debt related to the pandemic, into the special Climate and Transformation Fund. In November 2023, the German Constitutional Court ruled this act unconstitutional. Consequently, a massive gap emerged in this year's budget.
To address the situation, the Bundestag voted to suspend the debt brake for the fourth consecutive year. The debt brake does not permit the new indebtedness of the country's budget in a given year to surpass 0.35% of GDP.
"The suspension of the debt brake is necessary for accepting the budget correction for 2023, which includes primarily financial loans earmarked for energy aid from the WSF Crisis Fund - "Deutsche Welle" reports.
Accumulating billions more in debt
The revised budget for 2023 must also be ratified by the Bundesrat, the constitutional representative of federal states and a component of the parliament. If approved, our neighbor's debt will increase considerably.
"With the amended budget and a planned sum of 70.6 billion euros (around 80 billion USD) in new debt, the federal government will exceed the permissible limit by 44.8 billion euros (approximately 51 billion USD). Of this, 43.2 billion euros (around 49 billion USD) are allocated for energy price aid relating to gas, district heating, and electricity," "Deutsche Welle" reports.
The Constitutional Court's ruling will necessitate reductions in the 2024 budget, too. For example, the budget of the Climate and Transformation Fund will be reduced by 12 billion euros (around 14 billion USD).
