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Germany to seek debt rule suspension in 2023

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Germany will look to suspend its constitutional debt rule again this year after a shock court ruling blew a hole in the government’s spending plans, Finance Minister Christian Lindner indicated Thursday.

“The federal government will present a supplementary budget to constitutionally secure the expenditures made this year,” Lindner said.

The proposal would include a parliamentary resolution to declare an “exceptional emergency situation”, the legal basis for suspending the debt rule that limits borrowing to 0.35 percent of gross domestic product, he said.

Germany’s top court last week said Prime Minister Olaf Scholz’s government had broken the constitutional debt rule by transferring money earmarked for pandemic support to a fund to fight climate change.

The ruling left Berlin with a huge 60-billion-euro hole in its budget and threw sorely needed investments into decarbonisation and the modernisation of the armed forces into doubt.

Following the court’s decision, the government suspended most of the projects being financed through the climate fund and imposed a broad freeze on spending for the rest of 2023.

Written into the constitution in 2009 under former Chancellor Angela Merkel, the brake was suspended from 2020 to 2022 during the pandemic and energy crisis, but was set to come back into force this year.

A return to the debt limit was a key commitment made in the government’s coalition agreement, which was signed by the Social Democrats, the Greens and the pro-business FDP in 2021.

Lindner avoided direct mention of the brake, saying that he would present the new budget for 2023 next week to “clear the decks” before “we can talk about 2024 and the next few years”.

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Agence France-Presse (AFP) is a French international news agency headquartered in Paris, France. Founded in 1835 as Havas, it is the world's oldest news agency.

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