German Court Rejects Scholz Government's Budget Plan, Shaking Political Landscape

Germany's constitutional court has ruled that the government's re-allocation of 60 billion euros ($65 billion) of unused debt from the pandemic era to a climate fund was illegal, dealing a blow to Chancellor Olaf Scholz's coalition. The ruling sets a precedent for fiscal responses in future crises and could trigger tensions within the coalition. The court found that the budget maneuver violated Germany's Basic Law and the debt ceiling can only be exceeded in emergencies, which the transfer of funds to the climate fund did not satisfy. The ruling puts pressure on budget deliberations and requires the government to find alternative funding for the climate fund.