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Successful transformation needs pragmatism but not a new “Sondervermögen”

Sustainable fiscal policy does not need trickery

Following the German Federal Constitutional Court's historic ruling on the 2nd Supplementary Budget Act 2021, ways are being sought to ensure legal financing of the economic transformation. One option that is repeatedly brought up is the possibility of setting up a "Sondervermögen” (special fund) modelled on the special fund for the Bundeswehr (German armed forces). It is important to understand that this is not a real asset; on the contrary, it contains credit authorisations in the amount mentioned. A new paragraph in the Basic Law was necessary for its establishment so that the respective incurrence of debt in the financial year in which it is actually incurred is exempt from the provisions of the debt limit.


Emergency without ending? The federal budget in limbo

The second supplementary budget 2021 is incompatible with basic constitutional law and thus null and void

With the second supplementary budget 2021, the federal government seemed to have found the solution to its problems: The € 60 billion in unused funds earmarked for the consequences of the corona pandemic were transferred to the "Climate and Transformation Fund" (KTF). This special fund was intended to promote energy transition and climate protection instruments while at the same time complying with the debt brake. The diverging interests of the three coalition partners were therefore no longer subject to any budget restrictions; there was money for everything at once – and thanks to the credit authorizations "in reserve" until after the next federal election. However, a "win-win" turned into a "lose-lose situation" after the ruling of the Federal Constitutional Court on November 15, 2023. The supplementary budget was "incompatible with the basic constitutional law and thus null and void"[1], making the reallocation of funds unconstitutional.

Adobe Stock / Twinny B Studio

There is still a gap between the federal states and municipalities

How municipal information security can be strengthened

In recent years, there have been numerous IT security incidents in municipal administrations and organisations. The Online Access Act (OZG) obliges local authorities to digitise their processes. More and more sensitive citizen data is being processed digitally. In many of the approximately 10,900 local authorities across Germany, the IT infrastructure is outdated, the IT systems are not sufficiently protected, the financial resources for information security are too low and the personnel requirements are far too high. This makes municipalities in Germany easy victims for attacks.

Adobe Stock / Wolfgang Jargstorff

Bioenergy: An Underestimated Pillar of the Energy Transition

Challenges and Opportunities for Bioenergy

Against the backdrop of Russia’s war of aggression against Ukraine, energy supply security has become a new priority, as a result of which bioenergy is also attracting greater attention again as a domestic energy source. Key framework conditions for bioenergy are changing this year due to a series of changes in legislation, such as the amendment of the German Building Energy Act (Gebäudeenergiegesetz), the German Renewable Energy Act (Erneuerbare-Energien-Gesetz) and the European Renewable Energy Directive.

IMAGO / NurPhoto

China's Financial System in Turmoil

What Does This Mean for German Investments?

Since it became known over a year ago that the Chinese real estate developer Evergrande is at risk of collapsing under its immense debt burden, it has become clear that the Chinese financial system has weaknesses. The situation is now escalating dramatically: in the past few days alone, it has been revealed that another real estate group, "Country Garden," is facing payment difficulties; the same goes for the major trust fund "Zhongrong International." The Chinese yuan has fallen so far that Chinese banks intervened in the foreign exchange market to stabilize the exchange rate.

IMAGO / Sabine Gudath

Back on track for success in housing policy

Ways out of the crisis

The promotion of home ownership is and remains an important component of social policy and can make a significant contribution to equality of opportunity and intergenerational justice. More courage is needed to implement urgently needed reforms. This brief asks how housing policy can be put back on the road to success, for example by lowering the cost of property financing.

AdobeStock / William W. Potter

De-Dollarisierung der Weltwirtschaft?

Warum der Renminbi nicht als neue Leitwährung taugt

In jüngster Zeit tauchten vermehrt Meldungen über eine vermeintliche De-Dollarisierung der Weltwirtschaft auf. Die Dominanz des US-Dollars bei der Finanzierung des internationalen Handels sowie seine herausgehobene Rolle als Reservewährung würden demnach durch den Aufstieg des Renminbi und den Aufbau eines BRICS-eigenen Zahlungssystems bedroht.

natalikp / Adobe Stock

"Local for local” is not a solution, but a symptom 

For strategic economic policy to work, it must be economically rewarding for businesses

In early May, for the first time, EU adopted so-called extraterritorial sanctions to prevent the resale of sanctioned goods to Russia by companies in third countries. In October this year, the Carbon Boundary Adjustment Mechanism (CBAM) will gradually enter into force with the aim of ensuring that sustainably produced goods from the EU are not displaced by dirtily produced goods from abroad.

Adobe Stock / TungCheung

No Women’s Rights without Religious Freedom 

The German government is neglecting religious women

Religious freedom is increasingly under pressure worldwide. Muslim and Christian women and men in Asia are subjected to violent attacks, while atheists are persecuted in many Islamic countries and indigenous religious communities suffer from intimidation in Latin America. Women and girls are particularly affected by these human rights violations. A particularly gruesome example is Maira Shahbaz, who was abducted, tortured, and raped at the age of 14 in Pakistan. With video recordings of the acts, she was forced to give up her faith and to convert. Maira and her family were able to flee and have been in hiding ever since.

Adobe Stock / Emvats

Evaluating the draft legislation on the reform of the Stability and Growth Pact

Better not to reform than to reform wrongly?

The Stability and Growth Pact (SGP) is at the heart of European debt rules. The European Commission has currently presented a draft legislation for a reform of these rules. Indeed, a reform would be necessary: (1) necessary because enforcement of the SGP rules is poor and the current reduction paths are unrealistic. In particular, some member states have significantly exceeded the Maastricht debt ceiling of 60 per cent of gross domestic product (GDP). For example, according to Eurostat data of 2022, Greece reached a debt-to-GDP ratio of about 171 per cent, Italy of about 144 per cent, Spain of about 113 per cent and France of about 112 per cent – debt levels that would be difficult to reduce within 20 years, as required by the rules. (2) Would be because a reform should offer a better and more effectively enforceable set of rules than the existing EU debt rules. Why the current bill is not an improvement on the previous rules will be outlined below.

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About this series

Concise, reduced to the essentials, but always highly topical. In our series "kurzum", our experts summarise an issue or problem on a maximum of two pages.