Germany freezes public spending after court ruling on Covid funds reallocated to climate initiatives

alemania germany ZEW

Banca March : The court in Karlsruhe has declared unconstitutional the transfer of €60 billion that had initially been earmarked to tackle the pandemic, but was not spent, to an off-budget fund with climate and energy initiatives. The finance minister has sent an information letter to the rest of the cabinet warning of the blocking of new spending. With the increase in the deficit, the German constitution’s rules on the debt ceiling are at risk. The rules in question restrict the structural deficit to 0.35% of GDP and can only be exceeded in exceptional cases of emergency. After the singularities of the pandemic in 2020 and the armed conflict between Ukraine and Russia in 2022, they were re-established this year, 2023. Thus, the court’s ruling could imply a breach of constitutional limits and compromise support for businesses and consumers, during a period when the country has been hit by an economic downturn.

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