Traffic light coalition wants to suspend the debt brake again: financial expert comments on developments in 2023

Traffic light coalition wants to suspend the debt brake again: financial expert comments on developments in 2023

According to a report by www.bild.de, the traffic light coalition plans to suspend the debt brake in the Basic Law again for the current year 2023. Federal Finance Minister Christian Lindner has announced that he will present a draft supplementary budget to the cabinet next Wednesday. An “extraordinary emergency” is the prerequisite for suspending the debt brake. This should be proposed to the Bundestag. The Federal Constitutional Court has declared the massive increase in the Climate and Transformation Fund (KTF) with unused loans from the corona pandemic to be inadmissible. As a result, the traffic light coalition will lack 60 billion euros for energy transition projects in the coming years.

Lindner said in an interview that the Constitutional Court ruling should be viewed “as an order.” The new legal clarity is “not a reason to lower the debt brake, but rather to strengthen it.” Nevertheless, he is now planning to suspend the debt brake for 2023.

As a result, Lindner has imposed a spending freeze on large parts of the 2023 budget and the economic stabilization fund. The aim of the supplementary budget for 2023 is to place the expenditure for the electricity and gas price cap on a constitutionally secure basis.

This renewed suspension of the debt brake can have an impact on the market and the financial sector. Such a measure could lead to a further deterioration of Germany's image in terms of financial stability. This could affect the credibility and stability of the financial system. In addition, suspending the debt brake may cause distrust among investors, especially international investors who consider a country's economic and political stability before investing capital.

This measure may therefore lead to rising interest rates on government bonds and other financial instruments, which could increase the state's refinancing costs and put pressure on public finances. The impact on the market and the financial sector depends on further developments and the reactions of investors. It is important to carefully monitor market indicators and investor reactions in order to identify and assess potential risks in a timely manner. Developments in financial policy and possible changes to the debt brake are an important factor for analyzing the financial markets and evaluating investment opportunities.