(Bloomberg) -- Chancellor Olaf Scholz said he expects rapid progress in coalition talks on how to plug the hole left in next year’s budget by a court ruling that threw Germany’s financial planning into disarray.
The three governing parties need a revised agreement that’s ready to be signed off at a cabinet meeting on Wednesday to allow time for parliament to approve it by Christmas.
“We are working intensively on this,” Scholz told reporters at a news conference with Brazilian counterpart Luiz Inacio Lula da Silva in Berlin on Monday. “We are now in the process of clarifying this very quickly and expeditiously.”
The shock Nov. 15 ruling by Germany’s Constitutional Court upended the federal government’s decades-old practice of using special pots outside the regular budget to fund investments and raised doubts about tens of billions of euros in spending.
The ruling coalition was forced into a swift overhaul of its 2023 finance plan, while the blueprint for next year approved in cabinet in July was halted as it made its way through parliament.
Scholz, Economy Minister Robert Habeck and Finance Minister Christian Lindner are holding near non-stop negotiations to find a way to plug the €17 billion ($18.4 billion) hole in the budget for 2024 that resulted from the legal decision.
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A Finance Ministry spokeswoman told a news conference earlier on Monday that Lindner was in favor of cutting expenditure to make up the shortfall though he was not calling into question a jointly agreed increase in social benefits.
Part of the fix for this year involved triggering an emergency suspension of restrictions on net new borrowing, known as the “debt brake,” for a fourth straight year. They had initially been put on hold during the Covid and energy crises.
There have been calls across the political divide for the borrowing rules to be overhauled to enable Germany to make massive investment needed for its transition to a less polluting and more technologically advanced economy.
Such a move would require a two—thirds majority in parliament and therefore the support of the main opposition conservatives, who filed the lawsuit with the Constitutional Court that led to the judgment on special funds.
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