Germany's vice chancellor declares nation faces economic slowdown if government fails to replenish funds allocated for crucial green initiatives

(MENAFN) In a stark warning, Germany's Vice Chancellor and Economy Minister, Robert Habeck, declared on Monday that the nation faces an economic slowdown if the government fails to replenish funds allocated for crucial green initiatives. The cautionary statement follows the unveiling of a supplementary budget by Germany's ruling coalition, temporarily lifting a self-imposed cap on borrowing in response to a constitutional court ruling that disrupted the government's spending plans.

Speaking at a joint press conference with energy ministers from all 16 states, Habeck emphasized that any delays or setbacks in green transition projects would impact the "economic core of Germany." He underscored that the depletion of the fund could potentially shave 0.5 percent off Germany's GDP in the coming year.

Germany has set an ambitious goal of achieving carbon neutrality by 2045, necessitating substantial investments in a hydrogen network, new power plants, and upgraded solar and wind projects. The government had initially projected spending over EUR211 billion (USD231 billion) on energy projects between 2024 and 2027. However, a recent ruling by the country's top court prohibited the use of pandemic aid to finance green initiatives. The court argued that reallocating EUR60 billion of unused debt to the government's Climate and Transformation Fund violated constitutional law, leading Berlin to freeze most new spending commitments.

The ruling has also cast uncertainty over the utilization of hundreds of billions of euros in special funds that fall outside the federal budget. These funds cover measures to alleviate the impact of high energy prices on households and companies, according to Habeck. Germany currently administers 29 such non-budget funds, collectively valued at around EUR870 billion.

As Germany grapples with the aftermath of the court ruling and seeks to address the financial constraints on its green transition agenda, the economic implications loom large. Habeck's warning serves as a poignant reminder of the critical link between sustained funding for green initiatives and the nation's economic well-being, emphasizing the need for strategic financial measures to meet environmental objectives without compromising economic stability.


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