Germany's budget crisis: Climate fund freeze expands to broader cuts

The German Ministry of Finance has suspended almost the entire federal budget due to a severe shortfall. Initially, the blockage was intended to impact only the climate fund, reported German media based on the Ministry's statement. However, it now appears that the government is short of 60 billion euros, as emphasized by the ZDF Heute website.

Last week, the Constitutional Court declared the decision to allot 60 billion euros from the 2021 budget as unconstitutional. The federal government had planned to use these funds, initially meant for combatting the COVID-19 pandemic, for climate-related expenses.

In response to this ruling, the Ministry of Finance (BMF) decided to block "many items in the federal budget" for 2023, reported ZDF Heute, noting that the Ministry did not comment on this issue.

An announcement on the Ministry of Finance's website revealed: "The BMF has suspended the issuance of permits for obligations in 2023 to avoid financial burdens in the coming years".

"Approval of obligations enables the administration to undertake payment obligations for future years, such as for long-term projects. Hence, it won't impact expenses incurred this year. The Ministry also stated that existing obligations will continue, but new ones cannot be initiated", further clarified ZDF Heute.

Reportedly, this decision affects the budgets of all ministries, save for constitutional entities such as the president, parliament, and the Constitutional Court.

Economy Minister Robert Habeck warned that this verdict could weigh heavily on the German economy. He underscored that the climate fund "is a mechanism that ensures value and job creation". In an interview with Frankfurter Allgemeine Zeitung, Habeck stated: If this is jeopardized, jobs and value creation are at risk. The departure of industry would harm our country and society, as industry signifies employment, production, and the establishment of value chains.