Vice chancellor claims German economy shall go-slow with no green transition

(MENAFN) Germany is at risk of experiencing an economic downturn if the government fails to secure sufficient funding for its ambitious green transition projects, cautioned Vice Chancellor and Economy Minister Robert Habeck. This warning follows the unveiling of a supplementary budget by Germany's ruling coalition, temporarily lifting borrowing limits in response to a constitutional court ruling that undermined the government's spending plans.

Speaking at a joint press conference on Monday alongside energy ministers from all 16 states, Habeck emphasized that any delays or setbacks in financing green initiatives would impact the "economic core of Germany." He highlighted that the disappearance of funds dedicated to the green transition could result in a 0.5 percent reduction in Germany's GDP next year.

Germany has set a target to achieve carbon neutrality by 2045, necessitating substantial investments in critical areas such as a hydrogen network, new power plants, and the enhancement of solar and wind projects. The government had initially projected spending on energy initiatives to exceed EUR211 billion (USD231 billion) between 2024 and 2027.

However, a recent decision by Germany's top court prohibited the use of pandemic aid to finance green projects. The court ruled that reallocating EUR60 billion of unused debt to the government's Climate and Transformation Fund violated constitutional law. Consequently, Berlin was compelled to freeze most new spending commitments, raising concerns about the future of crucial green initiatives.

The court's decision has also cast doubt on the utilization of hundreds of billions of euros in special funds that fall outside the federal budget. These funds cover various measures, including those designed to alleviate the impact of high energy prices on households and businesses, according to Habeck. Germany currently administers 29 non-budget funds, collectively valued at around EUR870 billion.

As Germany grapples with the aftermath of the court ruling and strives to secure the necessary financial resources for its green transition, the economic implications of potential delays underscore the intricate challenges faced by nations in balancing environmental objectives with economic stability.


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