Germany's Budget Committee Pauses 2024 Budget Deliberations, Panel Members Say

BERLIN (Reuters) - Germany's budget committee paused final deliberations on the 2024 draft budget early on the morning of Friday 17 November 2023, according to the chief budget officers of the coalition government, after a constitutional court ruling threw negotiations into disarray.

Germany's ruling coalition is scrambling to fix a large hole in its finances after a court ruling blocked the government from transferring €60 billion in unused funds from the pandemic towards green initiatives and industry support.

The court's decision has increased tensions in Chancellor Olaf Scholz's already fractious three-way coalition, which has seen support slump as it tackles a series of crises and the economy teeters on the brink of recession.

Although the Greens want additional spending, the Free Democrats (FDP), which head the finance ministry, reject additional debt and higher taxes.

"Some of the expenditure planned for the coming year will now have to be cut, which the governing parties are likely to find difficult to agree on," said Commerzbank chief economist Joerg Kraemer.

The contents of the ministries' budgets were finalised during the committee meeting, the budget officers said.

The state gas and electricity price brakes, which were due to expire at the end of the year, have been extended until 31 March 2024, the German news agency dpa reported on Friday.

The European Commission, which must approve the change, only allowed for an extension until the end of March, dpa said, citing the Bundestag's Energy Committee.

Some specific expenditure allocations, however, will be discussed next Thursday 23 November 2023 in detail, after a special meeting on Tuesday to discuss the impact of the constitutional court ruling.

Final key budget figures and new debt figures will be made public after the meeting next Thursday, instead of this week as previously expected.

One of the two sections of the budget that could not be finalised contains key projects such as doubling military aid to Ukraine to €8 billion in the coming year.

On Wednesday 15 November 2023, the constitutional court decision prompted the government to postpone the formal vote of the budget committee until next Thursday.

Despite the court ruling, the 2024 budget is expected to be passed as planned at the end of the Bundestag's budget week on 1 December 2023, according to members of the budget committee.

The chief budget officers of the coalition government accused the opposition of refusing to cooperate in budget deliberations.

"We call on the CDU/CSU to deal responsibly with the court ruling and its consequences instead of blocking work in parliament," they said.

Friedrich Merz, whose main opposition Christian Democratic Union party is suing the government, said his party is considering a new lawsuit against the €200 billion Economic Stabilisation Fund (ESF).

The ESF was created in 2020 with the objective of supporting companies amid the coronavirus pandemic but since last year it has focused on the energy crisis.

There are 29 special funds at the federal level, with a total volume of €869 billion, according to the independent auditing institution Bundesrechnungshof.

It is not clear which of these funds are at risk, with the exception of the €100-billion special fund for Germany's army, which is covered by a separate constitutional exemption from the debt brake.

"These fears seem overblown," Commerzbank's Kraemer said. "However, there are considerable risks associated with the Economic and Stabilization Fund."