The new German government will strengthen the climate fund

The new German government approved an additional budget on Monday, which will allow it to provide the climate and transformation fund with 60 billion euros financed from the new debt and thus secure more investment for the transition to a green economy. The supplementary budget, unanimously approved by Olaf Scholz's cabinet, will direct € 60 billion of this year's unused debt approved under the federal budget to the government's climate and transformation fund for future spending. The budget maneuver agreed last month by the center-left Social Democrats (SPD), spending the Greens and the more fiscally Free Democrats (FDP) in their coalition agreement will make maximum use of the temporary suspension of the so-called debt brake in Germany during the new coronavirus pandemic. Thanks to this compromise, the new Minister of Finance and FDP leader Christian Lindner can push for a return to the debt brake rule from 2023, while still allowing for more public investment needed to reduce carbon emissions in Europe's largest economy. The coalition wants to use these funds for critical public investment in climate protection measures - from charging stations for electric vehicles to better insulated homes, and also in the digitalisation of the economy. In addition to the additional € 60 billion in debt financing, the government will channel around € 18 billion from its tax and transformation fund next year from tax revenues, mainly environmental taxes and the carbon dioxide (CO2) emissions trading scheme. Scholz's governing coalition agreed to use an extraordinary debt suspension clause in 2022, for the third year in a row. And it will allow new loans of 100 billion euros. This will contribute to Germany's unprecedented new net debt of € 130 billion in 2020 and € 240 billion in 2021. From 2023, the new government coalition plans to return to the debt brake rule, which is enshrined in the constitution and limits new loans to only a small fraction of economic performance.