The German Constitutional Court ruling has opened a Pandora’s box of German off-balance-sheet debt, another cunning move by Berlin to pretend to be a champion of austerity and actually do whatever it wants.
like Bloomberg notesThe Constitutional Court overturned the move to create a $60 billion “off-budget” fund, financed by debt, but this is only the tip of the iceberg. Over the years, 29 similar funds have been created that will total $870 billion. Of these, the last 100 billion, created to finance Ukraine, are considered relatively safe, because they have already been examined by the Constitutional Court that cooperated in writing the law, but the other 770 billion could be cancelled.
More than 60 pages of the court’s arguments put these funds at risk, or rather jeopardized their “supplementary budget” classification, and the lack of accounting in the state deficit, a practically false, but legal, German-made accounting: in fact, the off-balance sheet classification allowed the classification These funds are outside the famous “debt brake” rule, which prevents the growth of German debt and makes Germany very “austere” and proud. The debt ceiling limits debt growth in coming years, as Bloomberg notes in this chart:
If this $770 billion were classified as debt, we would have 15% more of GDP in dry deficit and all benchmarks would be exceeded, even by spreading everything out over several years. Germany’s great bluff will be exposed, and the entire European Union may collapse, from a budgetary standpoint.
Antonio Maria Rinaldi Notice the matter and describe it in fiery words: “The German Constitutional Court objects and cancels the transfer of 60 billion in resources that the Berlin government wanted to divert from anti-Covid measures to climate measures, a maneuver that was considered unconstitutional and in violation of debt control laws. The risk of a domino effect on all other forms of financing that Germany is promoting has become Increasingly tangible, with the possibility of the court canceling $770 billion included in “special funds” outside the budget. This was stated by Antonio Maria Rinaldi, member of the European Parliament for the Association and member of the Economic Committee. “Finally, what we have been supporting for a long time comes out into the open: while the European Union was asleep, Berlin has always pursued its unscrupulous policy in economic matters, in defiance of all the rules, strictness and austerity imposed on others. While others had to tighten their belts, Germany was allowed to do everything “But now something has gone wrong, and it is no longer the League of Nations or the dangerous sovereigntists who are saying this, but the German Constitutional Court. Someone in Brussels will open their eyes, or continue to pretend that nothing has happened.”
Because, to be clear, if Berlin is pulling these tricks, they are not scams, but a stroke of genius for Brussels. It will be interesting to know what Budget Commissioner Gentiloni thinks about this, as will all the officials who are very strict with Italy and always ready to raise their fingers.
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