Germany faces 17 billion euro gap in 2024 budget – Finance Minister

BERLIN (Reuters) -Germany faces a 17 billion euro($18.66 billion) gap in the 2024 budget after a court ruling this month plunged the country’s finances into chaos, German Finance Minister Christian Lindner said on Wednesday on German broadcaster ZDF.

“For the 2024 budget, I am now assuming around 17 billion euros,” Lindner said. “As a comparison, the total federal budget is 450 billion euros.”

The size of the gap will determine whether it can be offset by savings or if the country’s debt brake must be suspended for another year.

While Lindner’s Free Democrats had spoken of a figure in the low double-digit range without giving a concrete figure before, a politician from Chancellor Olaf Scholz’s Social Democrats, Katja Mast, spoke on Wednesday about a “high double-digit billion” gap.

Germany’s constitutional court ruled on Nov. 15 the coalition government’s decision to re-allocate 60 billion euros of unused debt from the pandemic era to its climate and transformation fund was unconstitutional.

“We didn’t act wilfully and we didn’t act negligently either,” Lindner said. “But it is quite clear that this is an extremely unpleasant and embarrassing moment for a government.”

Germany’s budget crisis has given new momentum to reforming self-imposed borrowing limits, as hunger for sorely needed investment trumps an earlier political obsession with fiscal rectitude.

The SPD’s Katja Mast spoke out in favour of suspending the constitutionally enshrined debt brake, which limits a government structural budget deficit to 0.35% of gross domestic product.

“The SPD is convinced that a justification can be found” to declare an emergency situation, which would allow the brake to be suspended, she said, referring to the war in Ukraine and the subsequent costs for Germany, the transformation costs for a climate-neutral economy and maintaining social cohesion.

Hawkish Lindner and his Free Democrats, strong proponents of fiscal discipline, are opposed to lifting limits on net new borrowing again next year after the minister announced last week that he would suspend the debt brake for 2023 due to the court ruling.

“I am not yet convinced that the conditions for an emergency resolution would be met in 2024,” Lindner said on Wednesday. He said there are ongoing negotiations and he is willing to listen to other parties’ arguments, while expressing his doubts.

“My concern is that if we describe the emergency situation for such events and do this every year, we fail to recognise that at some point a one-off emergency situation will become a deplorable and regrettable new normal,” he said.

There is no date for the 2024 budget, a German government spokesperson said on Wednesday. It could be ready by Christmas or it would have to alternatively wait until January of next year.

According to German bank Berenberg, the government will cover a shortfall of roughly 30 billion euros to 40 billion euros($33-$44 billion) in 2024 compared with previous plans.

A total of 175 billion euros in spending for 2023 through to 2027 could be at stake following the court ruling, Berenberg said.

Germany’s constitutional court ruled on Nov. 15 that the coalition government’s decision to re-allocate 60 billion euros of unused debt from the pandemic era to its climate and transformation fund was unconstitutional.

The ruling is expected to heighten tensions in Scholz’s already fractious three-way coalition, which has seen support slump since taking office nearly two years ago as it tackles a series of crises, in part due to public infighting.

($1 = 0.9114 euros)

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