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Germany’s top court annuls move to repurpose COVID funding

Germany’s highest court has ruled that the government’s 2021 reallocation of unused coronavirus pandemic credit is unconstitutional. The government’s climate action budget is now €60 billion short.

What was the government planning?
In December 2021, the German coalition government agreed on an unusual budgetary maneuver that saw €60 billion ($64 billion) of untapped credit secured to help combat the effects of the pandemic reallocated to its so-called climate and transformation fund (KTF).

The KTF is a special fund, separate from the normal state budget, that finances measures for climate protection. These include support for the development of green technologies to the renovation of old housing stock and oil and gas heating systems.

The reallocation of debt away from its original pandemic purpose to the KTF was made possible by a temporary, pandemic-related suspension of borrowing limits in the constitution. The so-called debt break restricts the German public deficit to 0.35% of GDP but this was suspended due to the pandemic from 2020 to 2022.

How did the German government try to justify the budget maneuver?
Government budget secretary Werner Gatzer says that the reallocation of the pandemic credit did not constitute misappropriation, arguing that investment in climate protection could actually act as a catalyst for Germany’s post-pandemic economic recovery.

He justified the retrospective reallocation of the credit by saying that, otherwise, there could have been a delay of several months to clear funds.

The constitutional court, however, disagreed.

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