Crisis grows in Berlin as court warns 2023 supplementary budget is ‘problematic’

BERLIN — Germany’s ruling coalition risks further crisis after the country’s federal audit court warned on Monday evening that its supplementary budget for 2023 is "extremely problematic under constitutional law."

The court’s statement comes ahead of Tuesday’s key parliamentary budget committee hearing.

Chancellor Olaf Scholz’s government was forced to propose the supplementary budget last month after a bombshell ruling by the country’s constitutional court blew a €60 billion hole in its finances.

That court ruling limited the government’s ability to draw from special funds outside the regular budget that were created to circumvent the country’s constitutional debt brake. The latter restricts the federal deficit to 0.35 percent of GDP, except in times of emergency.

The decision means that about €40 billion that has already been used this year for energy price subsidies, and which was financed through such a special fund, must now be retroactively integrated into the regular budget.

Finance Minister Christian Lindner had to perform some fiscal gymnastics before presenting the draft supplementary budget last month, invoking an emergency situation that allows the government to suspend the debt brake for this year.

The audit court, whose role is to supervise state finances and issue nonbinding warnings, isn’t waving that gimmick through, however.

In its statement, the audit court questioned the legitimacy of retroactively invoking an emergency for a current budget year that is almost over.

The auditors were also unhappy that the government only integrated two special funds into its supplementary budget, whereas other special funds — such as for child care or digital infrastructure, with a combined volume of €14.3 billion — remain outside the regular budget.

"In the opinion of the federal audit court, the government’s calculation of the borrowing relevant to the debt rule is therefore incomplete," the statement said.

The draft supplementary budget is currently under debate in parliament, meaning it can still be amended ahead of its planned approval later this month.