Monday, February 26

Germany’s Habeck Cancels COP28 Trip to Focus on Budget Talks

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(Bloomberg) — German Economy Minister Robert Habeck canceled a trip to the COP28 climate conference and the Middle East to attend talks in Berlin on solving the country’s budget crisis.

Chancellor Olaf Scholz requested that Habeck stay “in order to make further progress in the talks on the 2024 budget following the ruling of the Constitutional Court,” an Economy Ministry spokeswoman said in a statement Sunday. Scholz, Habeck and Finance Minister Christian Lindner of the pro-business Free Democrats had talks on Sunday evening and are expected to continue them throughout the week.

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Germany has been in a budget crisis since mid-November, when the country’s top court ruled that the allocation of €60 billion ($65 billion) in unused Covid-19 pandemic aid for climate protection to special funds outside the regular budget was unconstitutional. The Finance Ministry froze the current budget and the two largest special funds, and the government declared an emergency for 2023 in order to restore this year’s budget. 

Lindner has identified a €17 billion gap for next year and favors plugging it with cuts in social welfare spending. Scholz’s Social Demorats and Habeck’s Greens want to suspend the so-called debt brake, a limit on net new federal borrowing, in 2024 and take up new debt to cover the shortfall in order to invest in Germany’s clean-energy transition.

Habeck, who’s also vice chancellor in Scholz’s government and in charge of climate affairs, had planned to attend the UN climate conference in Dubai on Tuesday, followed by visits to Oman, Saudi Arabia and Israel. The trip was postponed until next possible date, the spokeswoman said. 

(Updates in the second and third paragraphs with latest on budget talks.)

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