Germany’s “debt brake” is also bad news for Brussels’ ambitious climate and defense plans

The court in Karlsruhe terminated Germany’s €60 billion climate fund. This gives Schulz less scope, and has consequences for the European Union.

At the beginning of the 21st century, Germany became the most successful country in Europe, at least economically. a World export champion Which sold its cars, machinery and other products all over the world. But the German industrial model is now under pressure due to the loss of cheap Russian energy, increasing competition from China, and the need to transition to a green and digital economy.

Meanwhile, supporting Ukraine is also costing Germany a lot of money, and economic rivals such as China and the United States are investing billions in modernizing their economies. This is a situation that requires large investments, but the Constitutional Court in Karlsruhe recently canceled a climate fund worth 60 billion euros. According to the court, the fund was in violation of constitutional provisions Debt brakesIt is a so-called “debt brake” that stipulates that the German government may not borrow more than 0.35 percent of GDP per calendar year.

According to the logic of debt control, the Karlsruhe Statement is understandable, but it is clear that Germany has too little fiscal flexibility at a time when major investments are necessary. Chancellor Olaf Scholz said on Tuesday that the modernization of the economy would continue, but did not say where he would get the money from. In any case, the court’s ruling limited his room for manoeuvre.

This is bad news for Germany and Europe. Negotiations on a new EU budget, including aid to Ukraine, will become more difficult if Germany’s fiscal space is minimal. But the real problem facing the European Union lies deeper than that. Ambitious plans are being drawn up in Brussels for a Green Deal, a stronger European defense and a greater geopolitical role for Europe. These are plans that cost money and require changes from citizens who are not always willing to implement them.

Not much of this will come of it if the political leadership in the largest and most important member state is so weak. The components of the German budget crisis will be familiar to Dutch people: bickering government parties that differ widely in content, climate policy that is unpopular among large groups of voters, and low numbers in opinion polls, while the far right is growing. At a time when Germany faces enormous challenges, Chancellor Schulz lacks political influence. The consequences of this will not only be noticeable in Berlin.