After the sudden pandemic and skyrocketing energy prices that followed the outbreak of war in Ukraine, it seemed time to redouble efforts to fulfil the party’s core mission: what party leaders call the “social-ecological” transformation of Germany’s market economy, POLITICO reports.
For the Greens, who form a tripartite governing coalition with the centre-left Social Democrats (SPD) and the fiscally conservative Free Democrats (FDP), the stakes for this transformation could hardly be higher.
A transition to green energy would help Germany, which ranks 11th in the world in greenhouse gas emissions in 2022, achieve the ambitious goal of cutting emissions by at least 65 per cent from 1990 levels by the end of the decade. This success will make Germany an example to all other countries of how industry and consumers can thrive while embracing the sweeping societal changes needed to avert climate catastrophe.
Last month, Germany’s highest court handed down a ruling that stripped the ruling coalition of the financial powers of might it needs to implement these plans.
The ruling by Germany’s Constitutional Court caused the country’s finances to lose 60 billion euros, after which the government was forced to fill the gap in an emergency. At the same time, the ruling sharply limits the government’s ability to use special funds created to circumvent the constitutional debt brake, which limits the federal budget deficit to 0.35 per cent of GDP, except in emergencies, according to POLITICO.
These special funds finance several projects that are key to the green agenda, such as the transition of steel mills to hydrogen energy, subsidies for the production of batteries and microchips, and the modernisation of the country’s railway network. Following the judgement, the German government was forced to freeze new spending and postpone the 2024 budget.
The problem of the crisis has become so urgent that Robert Habeck, the Greens’ top politician as economy minister, has been forced to cancel a trip to the COP28 summit in Dubai this week as the ruling coalition tries to fill a €17bn gap in next year’s budget. The fact that one of the most important Greens was unable to attend one of the world’s most important climate conferences underlines the problem. At times, Habeck seemed despondent about the party’s position after the court ruling. Habeck said during a recent visit to the eastern city of Jena:
“We were at the beginning of a new renaissance. We had just fought our way back to where we were. The financing is missing.”
A freeze on new spending has already partially halted the green transition in Germany. The Economy Ministry says it is currently unable to approve new state aid for polluting industries that want to switch from gas to hydrogen power.
There remains much uncertainty in German industry about what the new normal will look like once the 2024 budget is agreed, although government officials say the freeze on such spending is temporary, POLITICO reports.
Reiner Blaschek, the CEO of ArcelorMittal Germany said in an emailed statement, adding that the funding for the green transition of its steel plants — about half of a planned €2.5 billion investment — is now hanging in the balance:
“We are disappointed, and above all, worried.”
Jens Südekum, a professor for international economics from Heinrich Heine University Düsseldorf, said:
“The situation is very serious. Certain industrial sectors such as steel production are in a state of shock. No new investments are being made as everyone wants to know first if or when the subsidies will be paid out.”
In a speech to parliament last week, Chancellor Olaf Scholz pledged to “invest heavily” in Germany’s green transition, but he did not specify where the funding would come from.
Funding for another key Green Party project is also in question: Earlier this year, the ruling coalition passed a controversial bill to change the way homes are heated, effectively mandating the abandonment of oil and gas heating systems in favour of heat pumps. The law drew sharp reactions from many voters, especially conservatives, who saw it as government overreach.
German media reported that despite the budget crisis, the government had pledged to provide up to €21,000 per family for the installation of heat pumps.
The Green Party was founded 43 years ago, uniting environmental activists, pacifists and anti-nuclear advocates under a single party umbrella. The party first joined the federal coalition in 1998 as a junior partner of the SPD. Under the leadership of Joschka Fischer, who served as vice-chancellor and foreign minister, the Greens favoured a gradual phase-out of nuclear power. The move was ultimately successful: Germany’s last nuclear power plant closed this year.
On the eve of the German federal elections in 2021, the Greens campaigned to make Germany a “frontrunner” in tackling the climate crisis. Activist movements such as “Fridays for the Future” gained momentum and large numbers of voters expressed support for the Greens, giving them the best result in the history of federal elections with 14.8 per cent of the vote.
As the second largest party in the new coalition government, the Greens believed they would finally have the political clout to radically expand Germany’s efforts to combat climate change. But since then, the ruling coalition has suffered one crisis after another.
At a recent Greens congress in the southwestern city of Karlsruhe, where the party was founded, party members struggled to regain lost momentum. Habeck told party delegates:
“I am fighting so that we find the money.”
At stake, he argued, is not only the future of the planet, but Germany’s capacity to prosper and compete globally. Habeck added:
“Climate neutrality has become a hotly contested competition. The US and China are leading it with great determination and a lot of money.”
Habeck and many Greens believe the country’s debt brake, which German leaders imposed in 2009 amid the global financial crisis, is hampering the growth of investment needed to compete globally. He noted:
“The way the debt rules were designed 12 years ago, they no longer fit into these changed times. The rule prevents investment and climate protection and weakens the German economy in times of need.”
However, changing the rules is easy. Since the debt brake is enshrined in the constitution, any reform would require a two-thirds majority in parliament. It is unlikely that Germany’s conservative opposition, which views Scholz’s coalition as inept at handling the budget, will agree to reforms that let the government off the hook.
