Economic conundrums for Germany as top court cancels climate funding plan

When might it occur to politicians, German or not, that endless subsidies to feed their own climate obsessions either come out of the same pot as the rest of their government’s income, or by pumping up national debt – or both? Looks like a road to nowhere, or nowhere good.
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As Germany scrambles to find €60 billion after the constitutional court ruled that transferring unused COVID-related debt to a climate fund was against the constitution, economists warned that spending cuts could cost the country economic growth in the coming years following a parliamentary hearing on Tuesday, says Euractiv.

Last week, Germany’s Constitutional Court ruled that transferring €60 billion of unused COVID-related debt to a climate fund was against the constitution.

With the amount removed from the fund, the government is now discussing how to close the funding gap, with Finance Minister Christian Lindner (FDP/Renew Europe) calling for spending cuts.

But, at a parliamentary hearing on Tuesday, economists warned that cutting back on planned investments could prevent Germany from recovering from its current economic recession.

“We are stuck in stagnation, and we are facing a multiple, supply-side challenge for our economy,” said Michael Hüther, director of the German Economic Institute (IW), which is linked to German employers’ organisations.

The challenges of the green transition, infrastructure deficits and an ageing society “mean that we actually have a great need for investment here,” he added.

“If this doesn’t happen, and we see this in the description of historical investment crises, then they tend to feed on themselves over a longer period of time,” Hüther said, adding, “this means that we can probably no longer expect GDP growth next year”.

So far, economic forecasts by the EU Commission have predicted a contraction of the German economy by 0.3% in 2023 and a growth of 0.8% for next year.

His view was echoed by Jens Südekum, an economist at the University of Düsseldorf, who urged the government to resolve the issue quickly but without cutting back on investment, which could also put Germany at a competitive disadvantage internationally.

Full article here.