Semafor Signals
Germany’s budget crisis wipes off chancellor’s ‘Smurfy grin’
The News
Germany is facing a budget crisis after its Constitutional Court ruled last month that it was illegal for the government to divert 60 billion euros in leftover pandemic emergency money to a climate fund aimed at transforming its economy for the green future.
The country’s top leaders — from three different political parties — are now trying to agree on a way to plug the massive shortfall, as the crisis puts pressure on the leading coalition. And it’s likely to reverberate beyond Germany’s borders, including in Brussels and Ukraine.
SIGNALS
The issue may sound wonky, but many Germans are feeling a sense of collective panic over the future of Europe’s largest economy, The Guardian wrote. “The fear of austerity measures and the loss of German prosperity is rife.” Economic growth is expected to decline in 2024, Handelsblatt reported, and Germany’s expected budget cuts threaten its funding for Ukraine and European Union budget increases.
Chancellor Olaf Scholz is facing the bulk of the criticism, and his government is taking a hit in the polls. Radio station BR24 questioned whether his ”can-do image" is fading, with the financing of his climate initiative struck down. (It also noted that his so-called ”smurfy grin" has disappeared recently.) If his coalition can’t agree on a budget by January, it could collapse, though a government official told Reuters that it’s unlikely the leaders would let that happen. Deutsche Welle noted that a collapse would harm all three parties in the coalition, who are “desperately looking for a way out,” adding, ”It’s just not in sight.”
Even if Germany can’t pass a budget soon, it won’t “shut down” in the way the U.S. does when Congress can’t agree on how to finance the government. That’s because Germany’s constitution is “designed to prevent a disaster on this scale from ever happening,” The Local explained. The government is allowed to continue spending on public services without a formal budget, and government employees can’t be sent home. It’s like much of the rest of the world, The Washington Post wrote in 2018 during the last U.S. shutdown: “Most countries have installed specific mechanisms to escape a U.S.-style deadlock so that citizens don’t pay for partisan disagreements.”
