Why Germany’s Coalition Can’t Pass its Budget

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Internal feuds are threatening Germany's coalition as the courts have judged that their spending has violated the infamous "debt brake", throwing next year's budget into disarray. So in this video, we'll explain the debt brake and what might happen next.

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00:00 Introduction
01:50 The Debt Brake Explained
04:03 The Budget Crisis
05:42 What Happens Next?
08:25 Too Long (The Newspaper)

[ch.k.]

There will be no government shutdown in Germany like in the USA. We have Article 111 of the Basic Law.
1) If, by the end of a fiscal year, the budget for the following year has not been adopted by a law, the Federal Government, until such law comes into force, may make all expenditures that are necessary:

(a) to maintain institutions established by a law and to carry out measures authorized by a law;

(b) to meet the legal obligations of the Federation;

(c) to continue construction projects, purchases and the provision of other benefits or services or to continue to make grants for these purposes, to the extent that amounts have already been appropriated in the budget of a previous year.

Just a storm in a teacup.

[AaronOkeanos]

Imagine such a constitutal law in America or the UK. They would practically never get a budget ... for decades.

[Christian-oe]

Usually, your videos are really great overviews over political issues, however in this one you seem to have quite a bunch of inaccuracies.
First, at least afaik the Supreme Court ruling does not threaten a government shut down (or at least not something like what is associated with a government shut-down in the global political context like the US). The ministry of finance ordered the German government to preliminarily suspend making binding spending decisions until measures to balance the budget are established. But that doesn't appear to be a full-level government shut down.
Second, part of the problem is not just the Supreme Court ruling that struck down the 60 Billion Euro climate found, but also its implications on other Sondervermögen both on the Federal and State level. This probably should have been mentioned to explain why this ruling has so dramatic impacts on German finance. 60 Billion Euros over multiple years, while being a lot, won't break the bank of an Economy like Germany - upwards of 200 Billion Euros are much more likely to do so.
Third, when the debt brake was enshrined in the German constitution, the far-right extremist AfD didn't even exist. It makes little sense to show them as one of the parties supporting this constitutional amendment. Doing so gives extremist politicians more power than they actually had.
Fourth, you didn't show the logo of the German Federal Constitutional Court (Bundesverfassungsgericht), but of the Federal Administrative Court (Bundesverwaltungsgericht).
Fifth, a constitutional amendment does not only need a two-thirds majority in the Bundestag, but also in the Bundesrat. And notably, a number of conservative state minister presidents have come out in favor of modifying the debt brake for example to potentially allow for investment debt but not for consumption debt. This indicates that there might be an opportunity for achieving the two-thirds majority in both Bundestag and Bundesrat if the Social Democrats, Christian Democrats, Liberals and Greens find an agreement on the reform of the debt break. However, this would definitely take time and not be a short-term fix.

[abrakadaver]

Germany isn´t "falling out of Love with the debt break". According to actuall pollings roughly two thirds of the population wants to keep the debt break.

[MrCosinuus]

4:50 mentiones the "constitutional court" but shows symbol of the administrative court few seconds later. Well, their names in German are so similar, even many Germans confuse them:
-Bundesverfassungsgericht (Federal constitutional court)
-Bundesverwaltungsgericht (Federal administrative court)

[AaronOkeanos]

In a way this is also somewhat reassuring for the Euro that the 4th largest economy is guarantee for the Euro stability. And it has compared to a couple other currencies including the Pound which lost 45% (to the dollar) since the Euro was introduced.

[XY-uctw]

America, Japan or the UK are not good example for debt brake because all of them have their own currency. They can print money as much they want. In EU things work differently. Italy and other southern countries has bigger debts, which tolerated especially by Germany and ECB for years. If Germany also starts to make big debts, Euro will lose its value rapidly...

[EllieD.Violet]

1:27 'risk of government shutdown'

Wrong. Utterly wrong.

What's on hold for the time being, or 'at risk' as you like to put it, is new spending / financing new projects.

Other than that, government, public services etc will run business as usual. The advantages of clearly defined rules in a written and codified constitution 😎.

Greetings from Bavaria

[Apokalypto]

4:55 has the wrong court displayed, the constitutional court is the Bundesverfassungsgericht not the Bundesverwaltungsgericht.

[Draktand]

Running an economy on a budgetary surplus during good times is commendable, but doing so during bad times is just asking for trouble.

[jaschadopp]

The constitutional court in Germany is the "Bundesverfassungsgericht" and not the "Bundesverwaltungsgericht" (federal administrative court) whose logo is used at 1:02, 5:00...

[thepax]

It was a disfunctional coalition with a lot of infighting from the very beginning

[ecnalms]

This debt break idea sounds great, wish we had it in the UK. It forces government and politicians to be more responsible for their spending. After all, just relying on borrowing all the time can be regarded as lazy governance and this debt is essentially a tax on future generations.

Warren buffet talked about a similar idea regarding the US deficit: ""I could end the deficit in five minutes. You just pass a law that says that any time there's a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for re-election. Yeah, yeah, now you've got the incentives in the right place, right?"

[Pan_Z]

Imagine calling the mechanism that prevents current generations from burdening future ones with massive debts as "inappropriate for the future."

[yankeevictor]

- Me, see the title: What? The Germans are arguing about the debt? They have debt!?
- See the video: oh, they are arguing because some Germans even thought about getting some debt. Oh, that makes sense.

[bluedragontoybash]

Summary of this video

Germany has a debt break that limits the federal government's structural deficit to 0.35% of GDP per year.
The debt break also prohibits Germany's 16 federal states from running any deficits.
Germany has been known for running consistently balanced budgets.
Germany could borrow at negative interest rates.
The concept of the "schwartzer null" or black zero represents zero borrowing in Germany.
There is a black zero sculpture in Hesse's state finance ministry.
Germany's constitutional Court ruled that the government's proposed 60 billion Euro climate fund was inconsistent with the debt break and therefore illegal.
This ruling has caused an internal feud between the fiscally conservative FDP and their coalition partners.
The government has suspended a vote on the budget indefinitely, creating a risk of government shutdown.
Germany's debt break was created in 2009 by Angela Merkel in response to the euro zone crisis.
The debt break was supported by multiple political parties and seen as proof of Germany's economic stability.
France and the UK have run deficits of about 5% in 2022, while the US deficit is set to reach 7% in the coming years.
Other countries have not run deficits below 0.35% since the early 2000s.
Germany's debt to GDP ratio is 81%, above the 60% limit set in the 1992 M treaty.
The debt break has an emergency clause that was triggered during the pandemic and energy price spikes.
The debt break is seen as restrictive in normal times.
Merkel's debt break was a reaction to Germany's increased debt due to spending packages and bank bailouts during the euro zone crisis.
The debt break limited Germany's ability to run deficits and showed fiscal responsibility.
The government's proposed climate fund was seen as a violation of the debt break.
The feud over spending levels and the risk of government shutdown create uncertainty about what will happen next.

[nathanspreitzer]

Germany basically solo holds up the Euros value as other EU countries blow their budgets every year

[bwhog]

If Germany wasn't part of the Euro zone, with a declining debt, it'd be the currency everyone wanted to have. As it stands, a country with a low debt level becomes one that people generally want to invest in because they know there is good support for the country's economic base. See, the thing is that to get your debt down, you don't need a SURPLUS budge, you just need a BALANCED budget because paying off interest and maturing bank notes are part of that budge. If you're paying off old debt and not issuing any more, you get lower debt and with lower debt, the money that WOULD have gone to pay those notes is not free to be used for current expenses, not debt servicing. It also means that, without government money printing, inflation will tend to remain very low and that will also help economic activity. All Germany has to do here, IMO, is stay the course for another few years and everything will come back and then some.

[quentin]

1:04 Bundesverwaltungsgericht is not the constitutional court. It’s the Bundesverfassungsgericht

[Nordzumu]

What good is avoiding debt if Spain and the other southern countries borrow on their behalf? Spanish risk premium would be much higher without coasting on Germany via ECB.