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While North American newspapers frown with concern at the resounding Dutch election victory of Geert Wilders, an arguably more interesting crisis in neighbouring Germany is being somewhat overlooked.

In 2021, Germany held a Bundestag election that led to an awkward coalition government, with participation from the Social Democrats, the Greens and the Euro-liberal Free Democrats (FDP). The FDP normally gets somewhere between five and 12 per cent of the vote in Germany, and more often than not is in a position to swing the national government either to the centre-left Social Democrats or the centre-right Christian Democrats.

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This time out, the chairman of the Free Democrats, Christian Lindner, was handed the finance portfolio and promised to rein in the spending impulses of the Reds and the Greens.

The German Constitution has an unusual rule that was introduced in 2009: a “debt brake” that limits the federal deficit in any given year to 0.35 per cent of gross domestic product. This is a pretty tight limit, which can be waived only if there is a recession, or the government declares a public emergency. (The analogous figure for the Canadian federal government was 0.6 per cent for the second quarter of this year and 1.2 per cent for the first.)

The debt brake helped Germany (and Chancellor Angela Merkel) establish a reputation for marvellous fiscal rectitude in the decade after it was created. But the multiple blows heaped on German public finances by COVID and the Russo-Ukrainian war (when do we start capitalizing the W?) began to add up.

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The previous German government declared an emergency in 2020 and created a coronavirus relief fund that was outside the envelope imposed by the debt brake. In December 2021, with lots of credit left in the COVID instrument, the new part-Green German government decided, hey, looks like we’ve got some free money we can invest in green energy measures.

It decided to put 60-billion euros (about C$90 billion) of the COVID fiscal room into encouraging electrified home heating and transport. But opposition politicians naturally saw this as an unconstitutional swindle and an abuse of emergency powers. The constitutional status of the debt brake allowed them to sue in federal court — and last week they won. Pretty resoundingly, as it happens.

This punched a huge hole in German finances, and on Tuesday a humiliated Lindner announced an immediate freeze on federal spending. Meanwhile, the coalition could no longer paper over its fundamental differences.

The Greens hate the debt brake and would like to see it eliminated — but the necessary constitutional change would require the support of two-thirds of the Bundestag, which ain’t happening. The Social Democrats, leading the coalition but floundering in the polls, are naturally reluctant to raise taxes to meet the crisis. Lindner and the Free Democrats would prefer to stand up for austerity, but not at the expense of their own popularity.

As of this writing, it looks like the triad has found the most obvious solution to the problem: declare another state of emergency to allow more borrowing for the Green agenda.

National Post
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