Plot twist: German Chancellor Olaf Scholz and the two government vice-chancellors, Christian Lindner (Finance Minister) and Robert Habeck (Economic Affairs Minister) today presented the new 2024 budget law, after the ruling of the Constitutional Court of month ago that the reallocation of 60 billion of unused debt from the Covid era to the Climate Fund was not in line with the Constitution. Spending savings of 17 billion are expected.
The German executive has thus decided “to reduce subsidies harmful to the climate, to interrupt subsidies for electric vehicles and the solar panel industry ahead of schedule, to reduce some expenses of individual ministries and to try to make “more social expenditure is efficient. There will also be an increase in the price of CO2 emissions and the introduction of a new tax on plastic packaging,” as summarized by the ING bank in an analysis.
Finally, the Climate and Transition Fund will be reduced by a total of 45 billion euros for the period from 2024 to 2027. And Chancellor Scholz told the conference that the deal means Germany will stick to its key target to achieve a climate-neutral transformation of the economy, but added that “we will have to use much less money to achieve our goals.”
The SPD leader added that the coalition parties had agreed on priorities in the budget, as well as spending cuts and revenue increases to comply with budget rules, adding that this was “unpleasant but necessary”. The country's main financial instrument for climate action projects, the Climate and Transformation Fund (CTF), will be endowed with around 12 billion euros less in 2024 and 45 billion euros less until 2027, he said. the chancellor stated. However, she said the fund will still have “a very high total volume” of €160 billion, meaning central transformation projects will be covered.
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