Germany’s Federal Court of Audit does not buy Finance Minister Christian Lindner’s back-of-the-envelope calculations for maintaining the so-called debt brake.
In a report dated last Friday, but released this week, the court criticized the government’s use of “special funds,” which it said are now accumulating to a massive €869 billion. The auditors slammed this shadow budget as “hidden debt.”
“By shifting revenues and expenditures to special funds on a financially significant scale, the federal budget has been gutted over the years,” the Court of Audit warned.
Lindner has repeatedly committed to meeting the constitutionally enshrined Schuldenbremse, or debt brake, which allows Berlin to only make a very small amount of fresh debt every year. The fiscal rule aims to keep Germany’s debt-to-GDP ratio under 60 percent, in line with the EU’s debt rules.
But the coalition government, led by Chancellor Olaf Scholz, has increasingly pulled from pots of funding from outside the federal budget, including a €100 billion defense fund to upgrade Germany’s long-neglected military forces amid Russia’s war in Ukraine and to fulfill NATO’s goal of spending at least 2 percent of economic output for defense as of next year.
Other special funds have included a €200 billion pot of cash to help with energy bills, as well as a €60 billion climate fund to help meet environmental goals.
Germany has also used these special funds to boost its economy. In June, Scholz bagged a €30 billion Intel investment deal in Lower Saxony, after promising €10 billion in subsidies from the climate fund, according to two German officials.
The court warned that these funds jeopardize parliamentary oversight, and the effectiveness of the debt rule. “Parliament (but also the public) is in danger of losing an overview and thus also control,” the court said.
It’s not the first time the Court of Audit has hit out at the government’s bypassing of the debt rule. Last year, the court’s President Kay Scheller harshly criticized the budget sidestep, saying: “Ultimately, special funds, even if they are not called that, are federal debt.”
Although the €869 billion worth of debt from the use of special funds are not counted in the official federal budget, the country still has to finance the pots of cash, mostly through loans.
In response to the court’s report, the Ministry of Finance said that special funds were necessary in times of emergency, and that “crisis measures, in particular, are usually large in volume but limited in time, such as the gas and electricity price brake.”
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