GERMANY
DEBT BRAKE RULE - INTERNATIONAL
News:
What is the controversy
over Germany’s debt brake rule? | Explained
What's
in the news?
●
Germany’s constitutional court ruled
unlawful a government move to reallocate €60 billion, unused from the sums
initially earmarked for the pandemic emergency, to a “climate and
transformation fund” (KTF).
Debt
Brake Rule:
●
The debt brake rule caps government borrowing and restricts the federal government’s fiscal
deficit to 0.35% of GDP, while prohibiting deficit spending by Germany’s 16
regions.
Enactment:
●
This rule was incorporated into German law
in 2009 by a coalition, mirroring the
EU’s Stability and Growth Pact and the 2012 Fiscal Compact Treaty.
Legal
Challenge and Its Implications
1.
Opposition’s Argument:
●
It argued that climate change and energy
transition investments, being long-term, shouldn’t be funded by the debt
brake’s emergency exemption, which was specific to COVID-19 relief.
2.
Government’s Defence:
●
The government contended that the
reallocated funds addressed economic consequences of the pandemic by linking
investment shortfalls to COVID-19’s economic impact.