‘Our great-grandchildren will pay for this’ – Germany’s plan to borrow €200 billion in ‘shadow’ debt to pay for gas price cap criticized by federal audit office

Germany wants to borrow €200 billion to support gas prices using a budgetary trick

editor: REMIX NEWS
author: John Cody and Denes Albert
German Chancellor Olaf Scholz, center, Economy and Climate Minister Robert Habeck, left, and Finance Minister Christian Lindner, right, brief the media during a news conference about the energy supply situation in Germany at the chancellery in Berlin, Germany, Thursday, Sept. 29, 2022. (AP Photo/Markus Schreiber)

Germany’s ambitious plan to take out €200 billion in debt to pay for a gas price cap is designed to shelter consumers and businesses from skyrocketing energy prices, but Germany’s Federal Court of Auditors is already calling the entire scheme into question.

The German government has long employed “special funds” in its budget practices to avoid labeling spending as official debt. The questionable practice allows little oversight from parliament, but the Federal Court of Auditors points out that the €200 billion, which is yet another such item in the “shadow budget,” would further cloud the already murky boundaries of the country’s budget.

As Remix News reported, Germany’s federal coalition government announced last Thursday a gas price cap for which the federal budget has set aside €200 billion.

“Prices have to come down, that’s our conviction. To make them go down, we are putting up a big defensive umbrella,” said Chancellor Olaf Scholz (SPD) at a joint press conference with Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens).

Kay Scheller, president of the Federal Court of Auditors, sharply criticized the proposal, saying that special funds Germany has recently started utilizing are growing enormous. He pointed to the €100 billion defense development fund and the €60 billion climate fund, which create a lack of transparency in the federal budget, as reported by Hungarian news outlet Makronom.

He said that Finance Minister Christian Lindner’s (FDP) argument that money flowing in through special funds is different from ordinary debt, which can increase inflation, is wrong.

“In the case of special funds, the state borrows in the same way, so they are federal debt even if they are called something else,” said Scheller, adding that the German government makes disturbingly frequent use of special funds, over which there is a lack of parliamentary oversight.

“The federal budget is subject to the principle of unity, which means that it must be fully transparent to both parliament and the public,” added Scheller, stressing that the already large number of funds (there were 26 in 2020) makes this increasingly difficult.

Opposition to a “shadow budget”

Friedrich Merz, leader of the Christian Democratic Union (CDU), has a similarly scathing opinion of the proposal. He pointed out at a press conference: “The three funds mentioned above alone will mean €360 billion in new debt for Germany, while the annual budget is planned at €496 billion. The debt accumulated in the shadow budget is almost as much as an entire federal budget,” Merz said.

The conservative Alternative for Germany (AfD) party also warned of ballooning debt costs.

“Our great-grandchildren will pay for this policy,” criticized AfD co-leader Alice Weidel. Holes would only be plugged “instead of securing our future with an expansion of nuclear energy and making us more independent.”

The Federal Court of Auditors is a judicial body that, while a part of the federal system, is not subordinate to any branch of the government. It serves as the supreme federal authority for audit matters in the country, according to the country’s constitution. The court lacks the power to make or enforce legally binding rules but can make recommendations.

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