(Bloomberg) -- Germany’s coaltion may have to revisit a contentious compromise over next year’s budget after government advisers flagged potential legal issues with some of the planned measures.
After receiving feedback from constitutional experts and an internal advisory panel, the country’s finance ministry sees the need for further negotiations within the government and during the parliamentary process, according to officials who asked not to be identified in line with briefing rules.
Further spending cuts may be necessary, while declaring an emergency situation to circumvent constitutional borrowing limits isn’t an option, the finance ministry officials said.
The legal risk concerns plans to provide state-owned companies Deutsche Bahn AG and Autobahn GmbH with money in the form of loans, as well as the redirection of funds that had previously been allocated to curbing a surge in energy costs after Russia attacked Ukraine.
Chancellor Olaf Scholz’s government approved a draft 2025 budget last month, though some lawmakers in the ruling coalition were unhappy with the belt-tightening forced on them by Finance Minister Christian Lindner.
Lindner, who heads the fiscally hawkish Free Democratic Party, has insisted on restoring a strict borrowing limit — known as the debt brake — that was suspended to help deal with the pandemic and the energy crisis.
The German constitutional court already struck down a special budget vehicle in 2023, forcing the government to quickly find new sources of funding.
--With assistance from Carolynn Look.
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