With the floods in northern Germany, the relaxation of the country’s debt brake is back on the agenda. But instead of always returning to the same debates, what is finally needed is sustainable reform. A new study shows what this could look like and sets out the options for financing climate protection over the short term.
Within the news coverage of the severe flooding that affected Germany in late December and early January, the perennial debate on the country’s debt brake has resurfaced. Anchored in the German constitution, the debt brake can be exceptionally suspended at both federal and state level, namely “in the event of natural disasters or unusual emergency situations which are outside the control of government and which have a major adverse impact on public finances”. And this is exactly what is currently being called for in the context of the “Christmas floods” – the suspension of the debt break in 2024, for the fifth year running.
The debate follows a familiar pattern. An emergency arises, and there are calls to relax the debt brake. These are met with the rejoinders to “wait and see” what the final cost of the emergency will be and ensure proportionality. This back-and-forth process is likely to be repeated, as emergency situations, especially those related to extreme weather events, will recur. As we know all too well by now, the less we invest in climate protection and in a future-proof, resilient society and infrastructure, the greater the likelihood that we will have to cushion the impact of new emergencies. Of course, criteria are needed to determine when debt limits can be relaxed in emergency situations. But what is missing is the opportunity to invest preventively in a secure future in order to avoid stumbling into this crisis cycle in the first place.
The Federal Constitutional Court's budget judgement of November 2023, together with this most recent emergency, is reason enough to finally tackle the question of debt brake reform. In view of the immense challenges facing us, it would be irresponsible to leave the rule in its current state. In these times, different types of state expenditure must be assessed differently, depending on what they are to be used for. Monies spent on a sustainable economy and infrastructure, as well as on education and innovation, are important investments that will also continue to have a crucial impact in the future. They may even serve to safeguard or expand the state's spending flexibility. Limiting these expenditures to a particular budgetary year and placing them on the same level as other spending, as is currently the case, represents a short-sightedness that is unworthy of our constitution. This is also shown by the landmark judgement of the Federal Constitutional Court on the Climate Change Act from 2021.
At the Heinrich Böll Foundation, we have already worked on the connection between debt (cancellation) and the just transition to a climate-neutral economy from a global perspective. As a contribution to the current debate on the debt brake in Germany, we recently commissioned and published a study entitled “Finanzierung öffentlicher Zukunftsinvestitionen nach dem Haushaltsurteil des Bundesverfassungsgerichts” (Financing public investment in the future following the budget judgement of the Federal Constitutional Court). The study explores two key questions: How can spending on climate protection be made possible in the short term, also without a constitutional change to the debt brake? And which paths could bring about the sustainable reform of the debt brake in the sense of important future investments? In times of increasingly societal insecurity and the ever-clearer effects of the climate crisis, we need a constructive, cross-party debate on the way out of this brake on the future and towards a sustainable investment rule that does not play off the current welfare state against the needs of the future.
böll.column
Get involved! There’s no other way to be real – thus the message of Heinrich Böll, and, to this day, his encouragement is inspiring us. With this column the Presidents of the Foundation involve themselves in current social and political debates. This column will appear each month, authored, in turn, by Jan Philipp Albrecht and Imme Scholz.