Relations between the German coalition government’s two smaller parties, the Greens and the liberal FDP have been precarious, the alliance’s survival largely dependent on the latter’s grudging willingness to back ambitious Green decarbonisation plans and major investment in the sluggish economy. However the federal constitutional court has sent a rocket into those very plans and threatened to sunder the government itself.
The court in Karlsruhe, a vigilant enforcer of a controversial constitutionally-enshrined “debt brake” limiting state spending, ordered that €60 billion for clean energy and industrial projects from the government’s cornerstone project, the €177 billion Climate and Transformation Fund be cancelled. Under the rules, the government is limited to running a deficit equivalent to just 0.35 per cent of GDP unless justified by an emergency – in this case the money was unspent funds raised to fight coronavirus. Its diversion to green and industrial projects was “illegal” the court ruled.
Other “off balance sheet” government spending may now also be in jeopardy, including its €200 billion economic stabilisation fund, and several funds set up by regional states. The government’s budget strategy is in tatters, precisely the purpose of the complainant to the court ‚the fiscal hawks of the opposition Christian Democrats.
The government has limited options if it wishes to implement its programme. Amending the brake provision would require an impossible two-thirds majority in both houses. Others are suggesting the declaration of another state of emergency, this time, instead of coronavirus, in relation to the war in Ukraine. A legal challenge to this in Karlsruhe would be almost certain.
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It is not the first time the constitutional court has intervened in the country’s economic policy, previously, for example, attempting to block government support for EU fundraising. It is arguable, however, that the enshrining of a deeply political outlook – rigid fiscal conservatism – in the constitution undermines the freedom of movement of democratically-elected governments.