Germany’s long-held aversion to debt and its collective piety about fiscal discipline is finally catching up with it. An immense political and budgetary crisis that threatened to unravel Olaf Scholz’s coalition and derail the country’s climate strategy was narrowly averted in the early hours of Wednesday. But the country’s legally binding “debt brake”, the source of the month-long political crisis, remains in place.
After tense day-and-night negotiations between the coalition partners, an 11th-hour deal means the German government finally has a budget for 2024. But the fix will lead to an entirely unnecessary round of austerity in the middle of a sharp economic downturn. It could also undermine Germany’s – and by extension Europe’s – climate and energy transition and its economic recovery and restructuring.
