section_path: Crisis/Budget crisis
section_name: Budget crisis
paragraph_text: Budget crisis
  
  Beginning on 15 November 2023, a federal budget crisis for the 2024 fiscal year began when Germany's constitutional court ruled that the traffic light coalition government's €60 billion climate fund was unconstitutional. This fund, crucial to the coalition agreement and Germany's climate and energy transition plans, had been created by appropriating leftover emergency debt from COVID-19 pandemic relief measures.
  
  The budget crisis was complicated by disagreements on circumventing the debt brake (German: Schuldenbremse), a fiscal rule implemented in 2009 to limit the budget deficit to only 0.35% of GDP and cap the debt that federal and state governments can issue annually. The debt brake, while a cornerstone of German fiscal policy, had been frequently circumvented since its inception. Previous governments had found ways to work around it, including creating special funds for refugee costs in 2017 and suspending the rule during the COVID-19 pandemic and in response to the Ukraine war. By 2023, there were approximately 29 such funds operating outside the federal budget.
  
  After intense negotiations, Scholz's coalition reached a compromise in December 2023. The deal preserved the debt brake for 2024 but required substantial cuts to the climate and transformation fund, amounting to €45 billion from 2024 to 2027. This compromise averted an immediate political crisis, but necessitated austerity measures during an economic downturn and potentially undermined Germany's climate policy goals. Politico journalist Matthew Karnitschnig referred to the dilemma as "The most German crisis ever".