The budget crisis embarrasses Germany, Chancellor Olaf Scholz is at a crossroads, here's how the most powerful European country can get out of this "message"

Recently, especially with the latest decision of the Constitutional Court, the Germans have given the world 'schadenfreude', an opportunity to rejoice and laugh at someone else's misfortune, and with reason. And Southern Europe could not be happier than it is. That is, for the countries that spent years and years under the attack of the European fiscal 'inquisition' led by Germany, there is no better moment. And besides, the irony is that Germany has deliberately put itself in this position and has no idea how to get out, Politico estimates in its analysis. A stunning ruling by the Constitutional Court earlier this month invalidated the core of the German government's legislative programme, shocking public opinion. To circumvent Germany's self-imposed limits on any deficit, Social Democrat Chancellor Olaf Scholz's coalition has relied on a network of "special funds" outside the main budget. Scholz was convinced that the government could raise money without breaking the so-called debt curb. However, the court apparently disagreed. The court's move forced the government to freeze new spending and suspend next year's budget vote.

"Debt Curb"

Almost two weeks after this decision, there seems to be no easy way out. The expectation in the Bundestag is that Scholz will find enough cuts to repair the current €20 billion hole the decision has opened up in next year's budget, but not much more than that. Meanwhile, his government is in crisis. As Economy Minister Robert Habeck from his Green coalition partner desperately warned all parties that Germany's economic future hung in the balance, Finance Minister Christian Lindner caused panic and confusion by announcing a series of ill-defined spending freezes. On Thursday, the government had to deny a report that the cuts would affect a special fund set up to bolster Germany's armed forces after Russia's invasion of Ukraine. Between the lines, Germany's Constitutional Court judges suggested that the Scholz coalition's secret use of funds represented accounting fraud, the same kind of accounting 'alchemy' that caused Berlin to "turn its ear" on Greece for more than a decade before.

Arrogance ends in deja vu

For eurozone countries with a recent history of debt problems - a group that includes Greece, Spain, Portugal and Italy - Germany's financial situation is perhaps a kind of déjà vu. Since 2010, the country has found itself in the unenviable position of explaining to Wolfgang Schäuble, Angela Merkel's finance minister, how they plan to return to the path of fiscal stability. On Schäuble's advice, Greece almost completely ditched the euro. In recent months, Germany has once again taken on the role of fiscal policeman in Brussels, where officials are negotiating a new framework for regulating eurozone government spending, known as the Stability and Growth Pact. Berlin is skeptical of giving other eurozone countries much room to maneuver on spending. The latest budget confusion certainly won't help Germans fight for their cause.

Germany's dilemma

Basically, there is no objective reason for Germany to be in a quandary as to whether this is a real crisis, or as some believe, unlike Habeck, a fake debt crisis. The country's top credit rating means Berlin can borrow on better terms than almost any country on the planet. The only reason Germany can't spend money from special funds is not because it can't afford it, but because it remains blindly bound to an almost religious fiscal orthodoxy that sees deficit debt as a path to ruin. As countries like Greece and Spain struggled with their public finances in the years that followed, Germany's 'debt curb' looks like a far-sighted solution.