Berlin is hoist with its own legalistic petard

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Germany’s constitutional court has repeatedly proved its readiness to be a pain in the backside of want-to-get-it-done policymakers. It has long been weaponised by opponents of the European Central Bank: in 2020, it infamously usurped the European Court of Justice’s authority to interpret European law, over quantitative easing.

Last Wednesday, it was domestic economic policy that the country’s top court torpedoed. The judges in Karlsruhe barred a €60bn budgetary move made in the early days of the coalition government of social democrats, liberals and greens.

Because of the pandemic, the strict rules of the “debt brake” limiting public borrowing were still suspended in 2021. When the government took office late that year, it used a supplementary budget — for 2021 even if passed in 2022 — to shift unused borrowing authorisation from the main budget into a separate off-budget multiyear fund for green investments. The court has now found that this contravened the constitution’s strict rules against deficit funding.

The striking down of that budget manoeuvre presents an immediate economic challenge. Even Europe’s largest economy cannot effortlessly pull another €60bn (more than 1.5 per cent of annual output) out of its sleeve. If the state has already committed any of the money, then tough luck: the court says it “must compensate for this through other means”.

That is not insurmountable: the €60bn was to be spent over several years. Calculations can be tweaked, technical adjustments made, safety margins and reserves maxed out to find more money. Against that, the ruling threatens other off-budget funds too, at both federal and state levels.

The alternative of not doing the climate spending would be disastrous after two decades of under-investment in an economy that urgently needs to be fitted out for net zero and a…