The breach of the constitution and the debt brake: What is behind the decision of the Federal Constitutional Court?

The breach of the constitution and the debt brake: What is behind the decision of the Federal Constitutional Court?

According to a report by geschichtedergegenwart.ch, the second Senate of the Federal Constitutional Court revoked the second supplementary budget law from 2021 on November 15, 2023. This did not come as a surprise, as the reallocation of billions in the budget from unused Corona funds into a climate fund could hardly be compatible with the spirit of the debt brake. This verdict threw not only the federal government, but also state governments and the opposition into turmoil. The debt brake, which was made as strict as possible by the judge's ruling, was introduced in 2009 to deal with the financial crisis. But the actual meaning of this and the extent to which it is connected to austerity policy will be analyzed in detail below.

A look at ordoliberal history shows that the effects of debt brakes and austerity measures are closely linked to it. It is thus clear that the ordoliberal tradition as a whole emphasizes the importance of fiscal discipline. These fiscal discipline goals are mainly based against Keynesian ideas about global control and deficit spending, which ultimately leads to a certain skepticism about whether the deficits accumulated in times of crisis will be erased in times of boom.

It is therefore to be expected that, as a result of the judgment, the revision of the budget laws will be initiated in order to comply with the debt brake. In addition, the federal government's approval of the change to the Basic Law in early summer could lead to a larger public debate, as the dramatic developments of the financial crisis dominated media reporting. This could have an impact on the market and in the financial sector through increased interest in the topic and the changes in the law.