While Chancellor Olaf Scholz (SPD), Economics Minister Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) continue to intensively discuss how they should solve the major problem of the 2024 federal budget, the next bad news hits them: the Federal Audit Office comes out in a statement for one Hearing in the Budget Committee of the Bundestag this Tuesday concluded that subsequent repairs to the 2023 federal budget could also be unconstitutional.
As a reminder: The Federal Constitutional Court ruled on November 15th that the reallocation of unused Corona aid funds amounting to 60 billion euros into a climate and transformation fund (KTF) was unconstitutional.
Federal Audit Office sees “a constitutional risk”
Therefore, the Economic and Stabilization Fund (WSF) with the electricity and gas price brakes was stopped; funds financed from this, as well as the billions in aid for the victims of the flood disaster in the Ahr Valley, are now to be subsequently financed through the federal budget. Since this violates the requirements of the debt brake, an emergency situation was subsequently declared for the current year due to the war in Ukraine and a week ago the cabinet decided on a supplementary budget for 2023, on which experts have now commented.
Ministerial Councilor Jan Keller from the Federal Audit Office states in his statement that it cannot be ruled out “that the retroactive authorizations provided for in the 2023 supplementary budget could conflict with Parliament’s budget law and therefore carry a constitutional risk.”
Although the Federal Constitutional Court does not expressly take a position in its judgment on whether an emergency resolution can also be made retroactively, the judgment does contain comments on the nature of emergency resolutions that can be used to assess whether a retroactive emergency resolution was permissible.
Accordingly, the resolution defines an emergency in such a way that, from the Bundestag’s point of view, it challenges the state’s ability to act and should be managed as a crisis. At the same time, the emergency resolution should not only describe the emergency situation transparently, but also have a warning and, above all, checking function for the budget legislator with regard to the exceeding of the credit limit. Both functions are fundamentally opposed to the subsequent declaration of the emergency situation and the subsequent legitimization of loans that have already been taken out: “It is no longer possible to warn about facts that have already been created and Parliament’s examination of the necessity of taking out loans would also come to nothing from the outset.”
It is also seen as a significant error that not all special funds are taken into account on a yearly basis when taking out loans and the effects on the debt rule. “In the opinion of the Federal Audit Office, the federal government’s calculation of the borrowing that is relevant for the debt rule is therefore incomplete,” says Keller’s statement. This means that the upper limit of the debt rule will still be “significantly exceeded” by 14.3 billion euros even with the intended supplementary budget for 2023.
The traffic light has hardly any alternatives to the emergency situation in 2023
However, the traffic light coalition has the problem that there is actually no other way than the subsequent emergency that can be taken in order not to have presented a budget for the current year that is unconstitutional from the start. So far there have been no announcements of legal action against the supplementary budget, which the Bundestag and Bundesrat are supposed to decide on before the turn of the year.
The Federal Audit Office’s many special funds have long been a thorn in the side of the federal government because, from the authority’s point of view, they obscure the state’s actual debt situation. The Court of Auditors also sharply criticized the traffic light’s new booking technology for loans from special funds in a report for the Ministry of Finance at the end of August.
The background: In its law for the 2021 supplementary budget, the traffic light decreed that such special pots count towards the debt brake in the year in which they are filled – not in the year in which the loans are used. From the traffic light’s perspective, the extremely practical consequence: When the Ahr Valley Fund, the Climate Fund and the Economic Stabilization Fund were filled, the debt brake was suspended anyway. However, from the government’s point of view, it still needs to be examined whether the ruling from Karlsruhe also has an impact on special assets that were not filled with emergency loans.
Other experts see fewer problems
In contrast to the Federal Audit Office, the constitutional lawyer Hanno Kube, who represented the Union faction in its lawsuit in Karlsruhe, praised the federal government. It is “welcome” that the government is using the short time until the end of the year to “subsequently make the 2023 budget conform to the constitution,” writes Kube in his statement for the hearing on Tuesday. The government’s measures are an “understandable reaction” to the Federal Constitutional Court’s ruling; especially the canceled 60 billion in the climate fund.
Unlike the Court of Auditors, Kube also believes it is understandable “in view of the urgency of completing the supplementary budget legislative process” that the government still has to examine the possible effects of the ruling on special funds beyond the economic stabilization fund and the special fund for those affected by the Ahrtal disaster.
But Kube is also of the opinion that the subsequent emergency decision raises “questions”. In principle, such an emergency decision must be made “before the beginning of the relevant financial year”. However, budget constitutional law also recognizes the instrument of the supplementary budget, which responds to funding needs in the current financial year. It should be taken into account “that the Federal Constitutional Court’s decision, which was made late in the 2023 budget year, led to an exceptional situation,” said Kube. Overall, he therefore considers the government’s approach to be justifiable – both the supplementary budget and the retroactive emergency resolution
In its statement, the Federal Audit Office emphasizes that it must now be ensured even more “that the planning of the 2024 budget should be beyond any constitutional doubt.” This is again the subject of ongoing negotiations.
Companies in alarm mood – Scholz is threatened with a turbulent SPD party conference
The SPD in particular would like to have a fundamental agreement by the meeting of the Federal Cabinet this Wednesday on whether an emergency should be declared again in 2024 because of the Ukraine war and its consequences and the debt brake should be suspended. However, the FDP is calling for around 17 billion euros in savings potential to be set instead – in the social sector, for example, the increase in citizens’ money by twelve percent from January 2024 should be waived.
The SPD is also growing dissatisfied with Chancellor Scholz ahead of the federal party conference that begins on Friday because they obviously had no plan B for the verdict. Controversial debates are expected at the party conference. Many companies and industry are in a state of alarm because of the lack of clarity about the funding commitments for the transformation towards a more climate-friendly economy, it is emphasized in country circles. Many of the hydrogen projects classified as central could now be canceled – this could put a large number of jobs at risk.
This is also why the Social Democrats want a quick agreement with clarity in December so that the 2024 budget is ready at the beginning of the year. However, the cabinet would have to make a decision on this Wednesday so that resolutions from the Bundestag and Bundesrat would be possible before the turn of the year.