The German government plans to draw up a supplementary budget for 2023 after a Constitutional Court ruling threw spending plans into disarray, Finance Minister Christian Lindner said in Berlin on Thursday.

A decision to suspend a so-called debt brake will allow the government to significantly increase new borrowing this year. Lindner intends to present a supplementary budget for the current year next week on Wednesday, after consulting with Chancellor Olaf Scholz and Vice Chancellor Robert Habeck, who is also Germany's economy minister.

"There is now new legal clarity on how we have to deal with special funds and emergency loans," said Lindner. "We will now put expenditure, particularly for the electricity and gas price brakes, on a constitutionally secure footing."

The budget for 2024 will only be discussed once there is a "constitutionally secure situation" for 2023, Lindner added.

€60 billion hole in the budget

Lindner's decision follows a ruling by the Constitutional Court, which said a move to redirect €60 billion ($65 billion) of unused debt from the COVID pandemic era to a climate fund was unconstitutional.

The court's decision has implications not only for planned climate investments but also for the financing of the energy price brake, which is intended to provide relief from high electricity and gas costs.

The government wants to use an exemption from the debt brake this year because of the court ruling.

A fiscal hawk, Lindner had been reluctant to suspend the debt brake as his party, the neoliberal FDP, strongly advocates fiscal discipline.

What's the German 'debt brake'?

The debt brake is part of the German constitution and limits the federal government's structural net borrowing to 0.35% of gross domestic product. It was first adopted in 2009 after the financial crash. 

The brake was suspended from 2020 to 2022 during the pandemic and energy crisis but was set to come back into force this year.

dh/sms (AFP, dpa, Reuters)

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