Judgment of 15 November 2023

R e a s o n s :

A. 

1

In the abstract judicial review proceedings, the applicants challenge the Second Supplementary Budget Act 2021 (Zweites Nachtragshaushaltsgesetz 2021) of 18 February 2022 (BGBl I p. 194), which retroactively amended the Budget Act 2021 (Haushaltsgesetz 2021) and the 2021 federal budget after the end of the 2021 fiscal year.

I. 

2

1. The numerous measures taken from the spring of 2020 onwards to combat the COVID-19 pandemic and to mitigate its consequences imposed significant burdens on the state budget.

3

a) Originally, the Budget Act 2020 (Haushaltsgesetz 2020) of 21 December 2019 (BGBl I p. 2890) did not provide for net borrowing.

4

b) In response to the outbreak of the COVID-19 pandemic, the German Bundestag for the first time declared the presence of an unusual emergency situation within the meaning of Art. 115(2) sixth and seventh sentence of the Basic Law (Grundgesetz – GG) on 25 March 2020 (cf. Bundestag document, Bundestagsdrucksache – BTDrucks 19/18108 in conjunction with BTDrucks 19/18131).

5

c) Subsequently, the Supplementary Budget Act 2020 (Nachtragshaushaltsgesetz 2020) of 27 March 2020 (BGBl I p. 556) and the Second Supplementary Budget Act 2020 (Zweites Nachtragshaushaltsgesetz 2020) of 14 July 2020 (BGBl I p. 1669) enabled borrowing by the Federation. The Federation was hereby authorised to undertake net borrowing in the total amount of approximately EUR 218 billion in the 2020 fiscal year.

6

d) The declaration of an unusual emergency situation was confirmed and adapted by Bundestag decisions of 2 July 2020 (cf. BTDrucks 19/20128 in conjunction with BTDrucks 19/20716) and of 8 December 2020 (cf. BTDrucks 19/22887 in conjunction with BTDrucks 19/24940).

7

2. The 2021 federal budget originally authorised total borrowing of approximately EUR 180 billion (cf. Budget Act 2021 of 21 December 2020, BGBl I p. 3208).

8

a) The First Supplementary Budget Act 2021 increased that amount by a further EUR 60 billion to a total of EUR 240,175,714,000 for the 2021 fiscal year (First Supplementary Budget Act 2021 of 3 June 2021 – Nachtragshaushaltsgesetz 2021, BGBl I p. 1410). This increase was made possible by a further decision of the German Bundestag of 23 April 2021 pursuant to Art. 115(2) sixth and seventh sentence of the Basic Law (cf. BTDrucks 19/28464 in conjunction with BTDrucks 19/28740).

9

b) Over the course of the 2021 fiscal year, it became apparent that the additional borrowing authorisations provided for in the First Supplementary Budget Act 2021 would not be needed. Against this backdrop, a political proposal was put forward to transfer the entire EUR 60 billion of additional borrowing authorisations granted under the First Supplementary Budget Act 2021 to the ‘Energy and Climate Fund’, a legally dependent special-purpose fund of the Federation (cf. Act for the Establishment of a Special-Purpose ‘Energy and Climate Fund’ of 8 December 2010, Gesetz zur Errichtung eines Sondervermögens „Energie- und Klimafonds“ – EKFG, BGBl I p. 1807), thereby making it possible to use the funds in subsequent fiscal years.

10

3. Art. 1 of the Second Supplementary Budget Act 2021 of 18 February 2022 (BGBl I p. 194) amended the 2021 federal budget by increasing the total volume of the budget from EUR 547,725,714,000 to EUR 572,725,714,000, and the volume of the Energy and Climate Fund from EUR 42,694,600,000 to EUR 102,694,600,000. The 2021 federal budget was amended accordingly. Art. 2 of the Second Supplementary Budget Act 2021 provided for the amendment to enter into force with retroactive effect from 1 January 2021.

11

Estimates for additional global income in the amount EUR 25 billion and a decrease in global spending in the amount of EUR 35 billion were included in the federal budget (Section 60 Chapter 6002).

12

The existing authorisation for net borrowing in the amount of EUR 240,175,714,000 that was based on the First Supplementary Budget Act of 3 June 2021 remained unaffected by the Second Supplementary Budget Act 2021.

13

4. […]

14-18

a) […]

19

b) […]

20

c) […]

21

d) […]

22

e) After having conducted an expert hearing on the Federal Government’s draft law on 10 January 2022, the Budget Committee issued a decision on 14 January 2022 recommending that the draft law be adopted with few amendments (cf. BTDrucks 20/400, p. 1 and BTDrucks 20/401). In particular, the draft law was supplemented by the following ‘Binding Explanatory Notes’ with regard to the budget item concerning the transfer to the Energy and Climate Fund (Title 614 01) (cf. BTDrucks 20/400, p. 3):

The funds allocated additionally under the Second Supplementary Budget 2021 in order to overcome the effects of the pandemic serve to finance the expenditures for mitigating and overcoming the emergency situation caused by the COVID-19 pandemic in the short and medium term. In this context, they are used for additional measures to address climate change, transform the German economy and tackle the backlog of investments:

1. strengthening investments in measures for energy efficiency and renewable energy in the building sector,

2. promoting investments in CO2-neutral mobility,

3. promoting investments in new production facilities in industrial sectors with emission-intensive processes by ‘carbon contracts for difference’,

4. promoting investments in the development of infrastructure for a CO2-neutral energy supply,

5. strengthening demand of private consumers and medium-sized businesses by abolishing the renewable energy levy (EEG-Umlage).

This Title is managed by the Federal Ministry of Finance.

23

The Budget Committee recalculated the numbers concerning the exceeding of the credit limit for permissible net borrowing and came to the conclusion that the limit would be exceeded by EUR 208.865 billion (cf. BTDrucks 20/400, p. 13).

24

f) Against the background of the recommendation, report and supplementary recommendation issued by the Budget Committee (cf. BTDrucks 20/530), the German Bundestag adopted the draft law in its session on 27 January 2022, including the amendments indicated in the overview of ‘Section 60’ attached to the Committee’s recommendation and the amended sums resulting therefrom as well as the titles listed in the supplementary document. [...].

25

g) […]

26

h) The Act was signed by the Federal President on 18 February 2022 and promulgated in the Federal Law Gazette on 25 April 2022 (cf. BGBl I p. 194).

27

5. The Energy and Climate Fund was originally established by the Act for the Establishment of a Special-Purpose ‘Energy and Climate Fund’ of 8 December 2010 (BGBl I p. 1807) as an essential contribution to the implementation of the Federal Government’s long-term energy concept. The special-purpose fund was supposed to facilitate additional expenditures on programmes to promote an environmentally sound, reliable and affordable energy supply and for climate action. The resources of the special-purpose fund must be legally and economically separated from the federal budget. The resources of the Energy and Climate Fund are budgeted for in the Energy and Climate Fund’s financial plan, which is adopted in conjunction with the Budget Act on a yearly basis.

28

In light of the ongoing COVID-19 pandemic and the resulting risks to the recovery of the economy and public finances, on 23 June 2022 the Bundestag passed the Second Act to Amend the Act for the Establishment of a Special-Purpose ‘Energy and Climate Fund’ of 12 July 2022 (cf. BGBl I p. 1144). The purpose of the law was to turn the Energy and Climate Fund into a ‘Climate and Transformation Fund’ (Klima- und Transformationsfonds - KTF). The Act for the Establishment of a Special-Purpose ‘Energy and Climate Fund’ was renamed the Act for the Establishment of a Special-Purpose ‘Climate and Transformation Fund’ (Climate and Transformation Fund Act, Klima- und Transformationsfondsgesetz - KTFG) (cf. BTDrucks 20/1598, p. 2).

29

The goal of the amendment was to enable the financing of additional climate action measures and measures for the sustainable transformation of the German economy. These measures must be suitable for combatting the economic consequences of the COVID-19 pandemic and at the same time must contribute to achieving the climate targets enshrined in the Federal Climate Change Act (Klimaschutzgesetz). Furthermore, the Budget Committee’s ‘Binding Explanatory Notes’ on the Second Supplementary Budget Act 2021 were expressly inserted into § 2a of the Climate and Transformation Fund Act, which specifies the purpose of the special-purpose fund (cf. BGBl I 2022 p. 1144 f.).

II. 

30

The applicants, 197 members of the German Bundestag, drew up an application for abstract judicial review on 18 March 2022, which the Federal Constitutional Court received on 7 April 2022. They seek a declaration that Arts. 1 and 2 of the Second Supplementary Budget Act 2021 of 18 February 2022 (BGBl I p. 194) are incompatible with Art. 109(3), Art. 110(1) first sentence and Art. 110(2) first sentence as well as Art. 115(2) of the Basic Law and are void.

31

The applicants argue that these provisions violate Art. 109(3) and Art. 115(2) of the Basic Law by transferring the borrowing authorisations to the Energy and Climate Fund ([…]). They also claim that holding borrowing authorisations as reserves in the Energy and Climate Fund fails to meet the constitutional requirements that apply to the structuring and use of special-purpose funds ([…]). They contend that the estimated figures for additional global income and decreases in global spending are too high and violate Parliament’s budgetary powers under Art. 110(2) first sentence of the Basic Law ([…]). Finally, they argue that the promulgation of the Second Supplementary Budget Act 2021 – coming after the end of the 2021 fiscal year – fails to comply with constitutional budgetary principles ([…]).

32-57

[…]

III. 

58

Only the Federal Government has made use of the opportunity granted to the German Bundestag, the Bundesrat, the Federal Government and all Land governments to submit statements in the proceedings in accordance with § 77 no. 1 of the Federal Constitutional Court Act (Bundesverfassungsgerichtsgesetz – BVerfGG). The Federal Government asserts that the application is unfounded.

59-83

[…]

IV. 

84

In conjunction with their application for abstract judicial review of 18 March 2022, the applicants requested a

preliminary injunction ordering that, until a decision is reached in the principal proceedings, the additional reserves allocated to the Energy and Climate Fund by Arts. 1 and 2 of the Second Supplementary Budget Act 2021 of 18 February 2022 (BGBl I 2022, p. 194) may only be used if and to the extent that the German Bundestag approves a corresponding expenditure in the 2022 federal budget to cover an allocation to the special-purpose fund.

85

The Senate rejected this application for preliminary injunction by order of 22 November 2022. It found that the application in the principal proceedings was neither inadmissible from the outset nor manifestly unfounded. The required weighing of consequences, however, revealed that the disadvantages that would arise if the preliminary injunction were issued clearly outweighed the disadvantages that would arise if the injunction were not issued, i.e. if the application were rejected (cf. Federal Constitutional Court, Order of the Second Senate of 22 November 2022 - 2 BvF 1/22 -, para. 217 ff. – Second Supplementary Budget Act 2021 – preliminary injunction).

V. 

86

In the oral hearing held on 21 June 2023, the parties to the proceedings specified their submissions and made additions. The following expert third parties presented statements in accordance with § 27a of the Federal Constitutional Court Act: Prof. Dr. Thiess Büttner, Chair of the Independent Advisory Board to the Stability Council, University of Erlangen-Nuremberg; Prof. Dr. Jens Südekum, Member of the Board of Academic Advisors at the Federal Ministry for Economic Affairs and Climate Action, University of Düsseldorf; Dr. Jan Keller as representative of the Federal Court of Audit; and Prof. Dr. Henning Tappe, University of Trier.

B. 

87

The application for abstract judicial review is admissible. The applicants have standing (see I. below), the subject matter of the application is admissible (see II. below), and the applicants have an objective interest in having the validity of the provisions clarified (see III. below).

I. 

88

Pursuant to Art. 93(1) no. 2 of the Basic Law in conjunction with § 13 no. 6 and § 76(1) no. 1 of the Federal Constitutional Court Act, one quarter of the members of the Bundestag can file an application for abstract judicial review if they consider a federal law or Land law to be void due to being formally or substantively incompatible with the Basic Law. [...]

89

The 197 applicants in the proceedings at hand represent more than one quarter of the 736 members of the 20th German Bundestag. They are all represented by the same authorised representatives and have all filed the same substantive motion.

II. 

90

Arts. 1 and 2 of the Second Supplementary Budget Act 2021 of 18 February 2022 constitute admissible subject matter for an application for abstract judicial review.

91

Federal law and Land law constitute admissible subject matter for an application for abstract judicial review pursuant to Art. 93(1) no. 2 of the Basic Law, § 13 no. 6 and § 76(1) of the Federal Constitutional Court Act. The provisions of the Basic Law and the Federal Constitutional Court Act do not impose any restrictions in this regard, for example with regard to the status, date of adoption (cf. Decisions of the Federal Constitutional Court, Entscheidungen des Bundesverfassungsgerichts – BVerfGE 2, 124 <131>; 24, 174 <179 f.>; 103, 111 <124>) or content (cf. BVerfGE 1, 396 <410>; 2, 307 <312 f.>; 20, 56 <91 ff.>; 79, 311 <326>; 119, 96 <117 f.>) of the provision under review. The only decisive factor is that the subject of review – in terms of its external form – constitutes an already existing (cf. BVerfGE 1, 396 <405 ff.>; 10, 20 <54>) legal provision (cf. BVerfGE 2, 307 <312>; 20, 56 <90>) that continues to have legal effect (cf. BVerfGE 5, 25 <28>; 20, 56 <93 f.>; 79, 311 <326 ff.>; 97, 198 <213 f.>; 100, 249 <257>; 110, 33 <45>; 119, 394 <410>; 127, 293 <319>).

92

A budget act can also constitute admissible subject matter for an application for abstract judicial review (cf. BVerfGE 20, 56 <89 ff.>; 79, 311 <326>; 119, 96 <117>). Generally, a budget act ceases to have legal effects after the end of the fiscal year as it normally (only) authorises expenditures during the current fiscal year (cf. § 3 Budgetary Principles Act (Haushaltsgrundsätzegesetz – HGrG), § 3 Federal Budget Code (Bundeshaushaltsordnung – BHO)). However, a budget act remains relevant until the Federal Minister of Finance discharges the Federal Government within the meaning of Art. 114 of the Basic Law in the course of the following fiscal year (cf. BVerfGE 20, 56 <93 f.>) – which in this case was in 2022, the year in which the application for abstract judicial review was filed. The Federal Court of Audit – in accordance with § 97(1) of the Federal Budget Code – submitted its respective report (cf. BTDrucks 20/4880, p. 11 f.) to the Bundestag on 6 December 2022. The application for abstract judicial review had already been filed by the application drawn up on 18 March 2022. Once an application has been filed in an admissible manner, it remains admissible – due to the objective nature of the proceedings – even if the decision is only rendered at a time when the budget act no longer has any legal effect (cf. BVerfGE 79, 311 <328>; 119, 96 <116 f.>; […]). The question of whether Arts. 1 and 2 of the Second Supplementary Budget Act 2021 of 18 February 2022 continue to have legal effects because the corresponding borrowing authorisations have been transferred to a special-purpose fund and thus have not been forfeited pursuant to § 18(3) of the Federal Budget Code is therefore irrelevant.

III. 

93

The applicants contend that Arts. 1 and 2 of the Second Supplementary Budget Act 2021 are incompatible with Art. 109(3), Art. 110 (1) first sentence, Art. 110(2) first sentence and Art. 115(2) of the Basic Law.

94

On this basis, the applicants have an objective interest in having the validity of the provisions clarified, as required for abstract judicial review proceedings by Art. 93(1) no. 2 of the Basic Law and § 76(1) of the Federal Constitutional Court Act (cf. BVerfGE 6, 104 <110>; 52, 63 <80>; 88, 203 <334>; 96, 133 <137>; 100, 249 <257>; 101, 1 <30>; 103, 111 <124>; 106, 244 <250>; 108, 169 <178>; 110, 33 <44 f.>; 113, 167 <193>; 119, 394 <409>; 127, 293 <319>; 128, 1 <32>; 157, 223 <249 para. 66>). Such interest is indicated if an institution or part of an institution that is particularly committed to the Basic Law is convinced that a provision is incompatible with higher-ranking federal law and applies to the Federal Constitutional Court for a declaration to this effect (cf. BVerfGE 6, 104 <110>; 39, 96 <106>; 52, 63 <80>; 96, 133 <137>; 103, 111 <124>; 119, 394 <409>; 127, 293 <319>; 150, 1 <77 f. para. 138>; 157, 223 <249 para. 66>). Only if the provision under review can no longer have any legal effects from any conceivable point of view (cf. BVerfGE 97, 198 <213 f.>; 100, 249 <257>; 110, 33 <45>; 133, 241 <259 para. 45>; 150, 1 <77 f. para. 138>; 151, 152 <161 f. para. 27> – Exclusion from voting rights in European elections – Application for a preliminary injunction; 157, 223 <249 para. 66>) does the objective interest not exist. This is not the case here (cf. para. 208). There is no need for a subjective general legal interest in bringing proceedings (cf. BVerfGE 103, 111 <124>).

C. 

95

The Second Supplementary Budget Act 2021 does not satisfy the constitutional requirements for emergency borrowing arising from Art. 109(3) first and second sentence and Art. 115(2) first and sixth sentence of the Basic Law (see I. below). With regard to the timing of its adoption, the Act also violates Art. 110(2) first sentence of the Basic Law (see II. below). It therefore need not be decided here whether the Act also violates the principles of budgetary clarity and reliability (Haushaltsklarheit und -wahrheit) under Art. 110(1) first sentence of the Basic Law (see III. below).

I. 

96

1. As a further specification of the general prohibition on incurring structural new debt imposed on the Federation and the Länder in Art. 109(3) first sentence of the Basic Law (‘debt brake’ rule – Schuldenbremse), Art. 115(2) first sentence of the Basic Law provides that revenues and expenditures in the Federation’s budgeting shall in principle be balanced without revenue from credits. Pursuant to Art. 109(3) fourth sentence and Art. 115(2) second sentence of the Basic Law, this requirement is satisfied when revenue from credits does not exceed 0.35 per cent in relation to the nominal gross domestic product.

97

Art. 109(3) second sentence in conjunction with Art. 115(2) third sentence of the Basic Law additionally provides that when economic developments deviate from normal conditions, the resulting effects on the budget in periods of upswing and downswing must be taken into account symmetrically, through a so-called ‘cyclical component’ (cf. in relation to this term § 2(2) and § 5 of the Act on the Implementation of Article 115 of the Basic Law (Gesetz zur Ausführung von Artikel 115 des Grundgesetzes, Artikel 115-Gesetz – G 115)). Pursuant to Art. 115(2) fifth sentence of the Basic Law, the specific mechanisms for taking cyclical economic developments into account must be set out in a federal law (cf. § 2(2) and § 5 of the Act on the Implementation of Article 115 of the Basic Law).

98

As the key provision in the case at hand, Art. 109(3) second sentence in conjunction with Art. 115(2) sixth sentence of the Basic Law authorises the Bundestag to issue decisions allowing the credit limits set by the aforementioned requirements to be exceeded in the event of natural disasters or unusual emergency situations that are beyond governmental control and are substantially harmful to the state’s financial capacity. These exceptional provisions are exhaustive (cf. BTDrucks 16/12410, p. 11; [...]).

99

In addition to the constituent elements explicitly mentioned in Art. 115(2) sixth to eighth sentence of the Basic Law (see a) below), there must be a causal connection between the emergency situation on the one hand and the exceeding of credit limits on the other (see b) below). Moreover, in the event of emergency borrowing, the principles of yearly budgeting (Jährlichkeit) and annuality (Jährigkeit), which also apply to the debt brake rule, must be respected (see c) below).

100

a) Art. 115(2) sixth to eighth sentence of the Basic Law lays down formal (see aa) below) and substantive (see bb) below) requirements for the exceeding of credit limits in case of natural disasters and unusual emergency situations. Compliance with these requirements is subject to differing degrees of constitutional review (see cc) below).

101

aa) Formally, Art. 115(2) sixth sentence of the Basic Law requires that a decision be taken by a majority of the members of the Bundestag within the meaning of Art. 121 of the Basic Law if the credit limit is to be exceeded in cases of natural disasters or unusual emergency situations. The requirement of a qualified majority conveys the significance of the parliamentary decision to permit an exception from the debt brake rule. It is left to the Bundestag’s discretion whether to take the decision pursuant to Art. 115(2) sixth sentence of the Basic Law by adopting a law or by merely passing a parliamentary resolution (cf. BTDrucks 16/12410, p. 13; […]).

102

bb) In substantive terms, Art. 115(2) sixth sentence of the Basic Law requires a natural disaster or unusual emergency situation (see (1) below) that is beyond governmental control (see (2) below) and is substantially harmful to the state’s financial capacity (see (3) below). Additionally, Art. 115(2) seventh and eighth sentence of the Basic Law require an amortisation plan to repay borrowed credits within an appropriate period of time (see (4) below).

103

(1) The reason for deviating from the regular credit limit must be a natural disaster or unusual emergency situation. The interpretation of the term ‘natural disaster’ within the meaning of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law can draw on the interpretation that has developed in the context of Art. 35(2) second sentence and Art. 35(3) first sentence of the Basic Law (cf. BTDrucks 16/12410, pp. 11, 13; [...]). Art. 35(2) second sentence and Art. 35(3) first sentence of the Basic Law lay down the constitutional framework for assistance between the Federation and the Länder or among the Länder ‘in case of a natural disaster or a particularly grave accident’. The term ‘natural disaster’ refers to immediately impending danger or significant harm caused by natural phenomena such as earthquakes, floods, severe weather, drought or mass illness (cf. BTDrucks 16/12410, pp. 11, 13; […]).

104

In contrast, the definition of an ‘unusual emergency situation’ within the meaning of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law deviates from the constituent element of a ‘particularly grave accident’ in Art. 35(2) second sentence and Art. 35(3) first sentence of the Basic Law. In the case-law of the Federal Constitutional Court, the latter is understood to mean an incident of major proportions – such as a serious plane or railway accident, a power failure affecting essential services of general interest, or an accident in a nuclear power plant – which affects the public in a special way due to its significance and is caused by human error or technical deficiencies (BVerfGE 115, 118 <143>).

105

In the course of creating the currently applicable versions of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law by constitutional amendment in 2009, the legislator forewent the possibility of including the term ‘particularly grave accident’ – which is used in Art. 35(2) second sentence and Art. 35(3) first sentence of the Basic Law – as another constituent element for the exception from the debt brake rule. In the context of public debt law, the term ‘unusual emergency situation’ that was included instead is to be interpreted in a manner specific to budgetary law. It is not therefore restricted to the scenario of a ‘particularly grave accident’ although it can include such accidents if they are of budgetary relevance.

106

Given that the spirit and purpose of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law are to safeguard the state’s capacity to act in budgetary and fiscal policy in order to manage the crisis (cf. BTDrucks 16/12410, p. 11), the term ‘unusual emergency situation’ must be understood as also including extraordinary disruptions to the economic and financial situation. This understanding of the term corresponds to the one advocated by the parliamentary groups of the German Bundestag that introduced the bill to amend Art. 109 and Art. 115 of the Basic Law in the constitutional amendment process. Accordingly, an ‘unusual emergency situation’ can also arise in the event of a massive and sudden impairment of economic processes due to an ‘exogenous shock’ if, for reasons of the common good, active support measures by the state are required to maintain and stabilise economic processes (cf. BTDrucks 16/12410, p. 11). In addition, ‘events of positive historical significance’ that trigger considerable financial needs – such as German reunification – can meet the criteria for applying Art. 115(2) sixth sentence of the Basic Law (cf. BTDrucks 16/12410, p. 11).

107

At the same time, the use of the attributive adjective ‘unusual’ implies that not each and every impairment of economic processes is covered by the exception in Art. 115(2) sixth sentence of the Basic Law. In particular, impairments of the financial and economic situation fall outside the provision’s scope of application if they are mere upswings and downswings as part of a cyclical economic trend (cf. BTDrucks 16/12410, p. 11). Indeed, the regulatory context of Art. 115(2) third sentence and Art. 115(2) sixth sentence of the Basic Law indicates that such developments must be dealt with exclusively within the framework of the debt brake rule’s cyclical component and cannot justify any further derogations therefrom (cf. BTDrucks 16/12410, p. 11; […]).

108

(2) According to Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law, the natural disaster or unusual emergency situation that provides the grounds for making an exception to the debt brake rule must be beyond governmental control.

109

This additional component has an equivalent in EU law. Art. 122(2) TFEU provides that the European Union may grant financial assistance to a Member State in the event of difficulties caused by natural disasters or exceptional occurrences beyond its control ([...]). The element of the uncontrollability of the event is the decisive factor, the idea being to prevent certain medium or longer-term developments such as a gradual accumulation of sovereign debt ([...]). Emergency borrowing may not be used to address the consequences of crises that were foreseeable for a long time or were even caused by the state itself ([...]).

110

(3) Pursuant to Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law, the natural disaster or unusual emergency situation must furthermore be ‘substantially harmful to the state’s financial capacity’. This constituent element establishes a link between the financial need caused by the emergency situation on the one hand and state budgeting on the other. According to the parliamentary groups in the German Bundestag that introduced the bill to amend Arts. 109 and 115 of the Basic Law, the relevant financial need may arise from the cost of remedying damages as well as from the cost of preventive measures ([...]).

111

(a) There must be a causal relationship between the emergency situation and the need to engage in new borrowing ([...]). It is necessary that the emergency situation causes a reaction by the state that substantially impacts the ‘financial capacity’ of the Federation and for this reason provides justification for new borrowing. The financial needs arising from the state’s reaction to the natural disaster or unusual emergency situation as well as from possible preventive measures must have a noticeable impact on the overall budget (cf. BTDrucks 16/12410, p. 11; […]).

112

(b) An emergency situation that does not ‘substantially’ impact the state’s financial capacity cannot justify new emergency-related borrowing. In such cases, sudden financial needs must be funded without additional borrowing, for example through budgetary redeployment of allocations, spending cuts, or tax increases ([...]). The constituent element ‘substantially harmful to the state’s financial capacity’ thus generally refers to the impact of the external crisis on state finances as a whole. No further requirements arise from the element of ‘substantial’ harm ([...]).

113

(4) In accordance with Art. 109(3) third sentence in conjunction with Art. 115(2) seventh sentence of the Basic Law, the decision to exceed credit limits in emergency situations must be combined with an amortisation plan. A mere parliamentary resolution is sufficient in this regard. It is not necessary to adopt a law ([...]). [...]

114

In substantive terms, the amortisation plan must provide for the repayment of the credits borrowed due to the emergency situation within an appropriate period of time pursuant to Art. 115(2) eighth sentence of the Basic Law. The parliamentary groups in the German Bundestag that introduced the bill to amend Arts. 109 and 115 of the Basic Law intended this repayment obligation to help prevent a further increase in sovereign debt (cf. BTDrucks 16/12410, p. 13).

115

cc) The written constituent elements of these emergency-related exceptions from the debt brake rule under Art. 109(3) second sentence in conjunction with Art. 115(2) sixth sentence of the Basic Law are, in principle, fully amenable to constitutional review (see (1) below). However, there are restrictions on the scope of review with regard to the requirement of ‘substantial harm to the state's financial capacity’ (see (2) below) and the organisation of the repayment of the credits borrowed within an appropriate period of time (see (3) below).

116

(1) The question of whether a situation constitutes a natural disaster or unusual emergency situation beyond governmental control is subject to full constitutional review. There are no obvious reasons for restricting the justiciability of these requirements. Although there is a broad range of conceivable scenarios that qualify as natural disasters and unusual emergency situations, the underlying requirements constitute legal concepts. As such, their interpretation and application are subject to judicial review in accordance with the standards described above ([...]).

117

(a) The fact that the provisions at issue are provisions of budgetary constitutional law does not mean that the scope of the Federal Constitutional Court’s review is restricted here. Like the provisions of federal constitutional law governing public finances, the provisions of constitutional law that govern the budget and, in particular, public debt do not have ‘a weaker binding force’ in the sense of ‘soft law’ (cf. on federal constitutional law governing public finances BVerfGE 72, 330 <388>) and do not constitute ‘provisions of lesser validity‘ ([...]).

118

(b) The legislative history of Art. 109(3) second sentence in conjunction with Art. 115(2) sixth sentence of the Basic Law supports the assumption that these constituent elements are subject to full judicial review. Until these provisions were introduced by way of the 2009 constitutional amendment (cf. Art. 1 nos. 4 and 6 of the Act Amending the Basic Law <Arts. 91c, 91d, 104b, 109, 109a, 115, 143d> of 29 July 2009, BGBl I p. 2248 (Gesetz zur Änderung des Grundgesetzes <Artikel 91c, 91d, 104b, 109, 109a, 115, 143d>)), the situation under constitutional law with regard to the admissibility of the Federation obtaining revenue from credits was, according to the case-law of the Second Senate, characterised by the legislator’s margin of appreciation and a considerable restriction of the Constitutional Court’s scope of review, which was limited to a review of the plausibility and tenability of the representations made by the legislator. This no longer holds true after the revision of Arts. 109 and 115 of the Basic Law.

119

aa) [...]

120

bb) [...]

121

cc) Apart from the debt brake rule included in the new version of Art. 109(3) first sentence and Art. 115(2) first sentence of the Basic Law, the 2009 constitutional amendment also established requirements for the permissibility of the Federation exceeding credit limits in unusual emergency situations in the new version of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law. Insofar as the emergency-related exemption refers to ‘natural disasters or unusual emergency situations beyond governmental control’, it now includes requirements that are more amenable to judicial review than the constituent element ‘disturbance of the overall economic equilibrium’ employed in the former version ([...]). In this respect, the Constitution-amending legislator’s fundamental objective of setting narrower and more manageable limits for the Federation’s borrowing corresponds with a higher standard of constitutional review (cf. BTDrucks 16/12410, p. 7: ‘The exemption is much more narrowly defined’; [...]).

122

(2) On the other hand, the requirement of ‘substantial harm’ to the state’s financial capacity under Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law is only subject to limited constitutional review. The Federal Constitutional Court must examine whether the unusual emergency situation led to an extraordinary – i.e. not merely insignificant – increase in financial need and was therefore generally capable of substantially harming the state’s financial capacity. However, when it comes to deciding what specific amount of additional financial need constitutes substantial harm to the state’s financial capacity, the legislator has a margin of appreciation ([...]).

123

(3) Likewise, the organisation of the repayment of the borrowed credits within an appropriate period of time pursuant to Art. 109(3) third sentence and Art. 115(2) eighth sentence of the Basic Law is only subject to limited constitutional review. In assessing whether the period of time for the repayment of the borrowed credits is appropriate, the legislator has a margin of appreciation ([...]). Parliament is tasked with assessing whether the period of time for the repayment of the borrowed credits is appropriate and must decide on this when drawing up the amortisation plan, taking into account the amount and scale of the increased borrowing and the specific economic situation (cf. BTDrucks 16/12410, p. 13).

124

b) If the written constituent elements are satisfied, ‘these credit limits may be exceeded [...]’ (Art. 115(2) sixth sentence of the Basic Law). The wording of the provision does not – at least not directly – indicate any quantitative or qualitative, absolute or relative limit on permissible new borrowing ([...]).

125

In addition to the constituent elements explicitly included in the wording, there must be a causal connection between the natural disaster or unusual emergency situation on the one hand and the exceeding of credit limits on the other (see aa) below). In assessing this causal connection, the legislator has a margin of appreciation (see bb) below). The Federal Constitutional Court does not review the proportionality of the emergency borrowing (see cc) below). In particular, the Court does not review the necessity and appropriateness of the emergency borrowing (see dd) below). Nevertheless, the legislator has a burden of substantiation to ensure that the Federal Constitutional Court is able to review whether the legislator’s decisions on borrowing are plausible and tenable (see ee) below).

126

aa) It follows from the written constituent elements of Art. 115(2) sixth sentence of the Basic Law that the Court must examine whether the natural disaster or unusual emergency situation substantially harms the state’s financial capacity, i.e. whether there is a causal relationship between the emergency situation, the increased financial need and the disruption of state finances.

127

However, the constitutionality of exceeding of the credit limits also depends on whether the specific borrowing authorisations are causally related to the emergency situation ([...]). While the constituent element of substantial harm to the state’s financial capacity generally refers to the impact of the external crisis on state finances, the requirement of a causal connection requires a specific link to the authorisation of exceptional borrowing and depends on whether there is a specific relationship between the authorisation – including the envisaged amount – and the emergency situation as the cause.

128

(1) This additional requirement of a causal connection is not expressly mentioned in the wording of Art. 115(2) sixth sentence of the Basic Law. Nevertheless, it ties in with the preposition ‘for’ (‘exceptions for natural disasters or unusual emergency situations’) in Art. 109(3) second sentence of the Basic Law. In addition, Art. 115(2) sixth sentence of the Basic Law expressly allows the credit limit only to be exceeded ‘in the event’ of an emergency situation.

129

(2) The requirement of a causal connection can moreover be deduced from an interpretation of Art. 115(2) sixth sentence of the Basic Law that also takes into account the regulatory context. In a systematic reading of Arts. 109 and 115 of the Basic Law, the debt brake rule set out in Art. 109(3) first sentence and Art. 115(2) first sentence of the Basic Law amounts to a fundamental principle, while Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law provide for a clearly defined exception from this principle in the event of an unusual emergency situation ([...]). This exception departs from a significant fundamental precept of budgetary constitutional law. It follows that – even if the written requirements of Art. 115(2) sixth sentence of the Basic Law are met – borrowing without limits or standards is not constitutionally permissible. Although there are no absolute limits on the amount of borrowing, there are relative factual limits ([...]). In order to give meaning to the provision’s character as an exception to the general rule in emergency situations, borrowing under Art. 115(2) sixth sentence of the Basic Law must be factually attributable to the specific emergency situation and to the legislator’s intent to address the emergency ([...]).

130

(a) The basis for this limitation is the parliamentary decision (Art. 115(2) sixth and seventh sentence of the Basic Law), which links the exceeding of the credit limit to the costs of the measures necessary to overcome the unusual emergency situation. At the same time, this decision defines the emergency situation that, according to the Bundestag, is challenging the state’s capacity to act and must be dealt with as a crisis. As the applicants rightly observe, the precise designation of the emergency situation clarifies the ‘identity of the historical event’ for the public while clearly and transparently identifying what the exemption is being used for, i.e. for the management of which crisis it is needed. The decision of the Bundestag thus performs a delimitation function that enables the democratic public to exercise control.

131

(b) Moreover, the decision raises the budgetary legislator’s awareness of the exceptional nature of exceeding the credit limits and thus requires it to bear in mind both the declaration of the emergency situation and the exceeding of the credit limits, and to examine them with particular care. The ‘warning function’ established by this regulatory mechanism also demonstrates the great importance placed by the Constitution-amending legislator on general compliance with the credit limit (cf. BVerfGE 132, 195 <245 para. 120>).

132

(3) A structurally similar requirement to the causal connection under Art. 115(2) sixth sentence of the Basic Law (new version) has already been established by the Senate with regard to the exemption that existed under old constitutional law. In the event of disturbances of the overall economic equilibrium pursuant to Art. 115(1) second sentence, second half-sentence of the Basic Law (old version), the Senate required the element of finality ([...]). Accordingly, the exceptionally increased borrowing had to be ‘suitable in terms of scope and use to avert the disturbance of the overall economic equilibrium’, whereby it was not sufficient ‘that increased borrowing was caused by a disturbance of the overall economic equilibrium’; it also had to be finally aimed at resisting the disturbance (cf. BVerfGE 79, 311 <339>; 119, 96 <140>).

133

Such a causal connection is all the more required under the current, stricter regulatory mechanism. The exceeding of the regular credit limits can only be compatible with the Constitution if the budgetary legislator uses it for the purpose of financing measures to overcome or prevent a natural disaster or unusual emergency situation ([...]). By contrast, new borrowing is incompatible with the Constitution if it is to be used for general policy measures which are not aimed at overcoming the crisis but are merely taken because the suspension of the debt brake rule appears to present a favourable opportunity ([...]).

134

(4) As a consequence of the required causal connection, the debt-financed measures must be suitable for promoting the purpose of overcoming or preventing a natural disaster or unusual emergency situation ([...]; on the previous legal situation BVerfGE 119, 96 <140>). In this context, suitability refers to the measures as a whole and not to each individual measure, because the individual measures can mutually reinforce and support each other or even give effect to one another in the first place ([...]; BVerfGE 79, 311 <340>). It is therefore ‘not the task of the suitability test [...] to separate out individual declared expenditures from this structure and to review them in isolation for suitability, possible savings or the like’ (BVerfGE 79, 311 <340>).

135

(5) The specific requirements for borrowing authorisations arising from this requirement of a causal connection in the individual case depend on the nature of the emergency situation and the measures necessary to combat it as well as on the necessary adjustments and follow-up measures. This is because exceeding the regular credit limits is only permissible with regard to these specific emergency measures.

136

(6) But contrary to what the applicants claim, the requirement of a causal connection does not give rise to any stricter requirements. In particular, it is not apparent that emergency borrowing could be limited to remedying the immediate consequences of the respective emergency situation. When revising Arts. 109 and 115 of the Basic Law, the Constitution-amending legislator also had a ‘massive and sudden impairment of economic processes due to an exogenous shock, such as the current financial crisis’ in mind as an example of an ‘emergency situation’, ‘which for reasons of the common good requires active support measures by the state to maintain and stabilise economic processes’ (cf. BTDrucks 16/12410, p. 11). The legislator also had the (positive) event of German reunification in mind. Indirectly, the financial and banking crisis of 2007 to 2009 mentioned in the explanatory memorandum to the law amending the Constitution led to a global economic crisis with far-reaching consequences. Moreover, it may not be possible to draw clear-cut distinctions between the direct and indirect effects of a crisis.

137

bb) The legislator has a margin of appreciation both when diagnosing the nature and extent of the emergency situation and, in particular, when designing the measures to combat and adjust to the crisis and any necessary follow-up measures ([...]). This applies in particular to the amount of the borrowing authorisations designated to secure the funding of such measures ([…]). It is incumbent upon the Federal Constitutional Court to review whether the legislator’s assessment is plausible and tenable in light of the views of experts in economics and public finance research (cf. BVerfGE 79, 311 <343>; 119, 96 <147 ff.>).

138

However, the longer ago the event triggering a crisis occurred – thus allowing the legislator more time for decision-making – and the more distant the effects of the crisis are, the more the budgetary legislator’s margin of appreciation will narrow, because the effects of its actions can be better estimated over time, thus preventing the exceptional situation of the exceeding of credit limits from becoming the rule, as was criticised with regard to the former constitutional provision ([...]).

139

(1) With regard to the legislator’s margin of appreciation in relation to the existence of a causal connection, a parallel can be drawn to the exemption under old constitutional law in Art. 115(1) second sentence, second half-sentence of the Basic Law (old version) regarding sovereign debt in the event of disturbances of the overall economic equilibrium. In this respect, the relevant case-law on the old provision (cf. BVerfGE 79, 311 <343>; 119, 96 <140>) can therefore generally be applied to cases arising under new constitutional law. This is not precluded by the fact that Art. 115(2) sixth sentence of the Basic Law (new version) is more specific than Art. 115(1) second sentence, second half-sentence of the Basic Law (old version), as the legislator’s margin of appreciation does not relate to the application of the written constituent elements, but to the additional requirement of a causal connection. With regard to this aspect, the situation under new constitutional law remains comparable to the one under old constitutional law.

140

(2) By specifying the constituent elements and objectively tightening the rules for borrowing by the Federation and the Länder (in particular Art. 109(3) and (5), Art. 109a, Art. 115, Art. 143d(1) of the Basic Law), the Constitution-amending legislator has moreover made it clear that a self-commitment of the respective parliaments and thus a palpable restriction of their capacity to act in budgetary matters is necessary in order to preserve democratic latitude in the long term (cf. BVerfGE 129, 124 <170>). ‘While a commitment of this kind restricts the democratic leeway to design in the present, it guarantees this leeway for the future. Even if the level of debt were to develop in an alarming manner over the long term, this would not – under constitutional law – be a relevant impairment of the legislator’s discretion to shape fiscal policy based on the situation at hand. Nevertheless, this results in a de facto constriction of the leeway for decision-making [...]. To avoid such a constriction is a legitimate aim of the (constitutional) legislator’ (BVerfGE 135, 317 <403 f. para. 169>).

141

In this context, it is primarily for the legislator to weigh up whether and to what extent steps should be taken to preserve the democratic leeway to design and make decisions by entering into commitments regarding future spending and therefore – correspondingly – accepting a restriction of one’s leeway to design and make decisions in the present. In this context, the Federal Constitutional Court may not with its own expertise take the place of legislative bodies, which are first and foremost entrusted with this task (cf. BVerfGE 129, 124 <183>; 135, 317 <404 f. para. 173>).

142

The legislator’s margin of appreciation here corresponds to the Federal Constitutional Court’s limited scope of review, which is restricted to an examination of the plausibility and tenability of the legislator’s assessments regarding the causal connection ([...]).

143

(3) Such a restriction of constitutional review is also supported by the fact that the Land constitutional courts also assume that the (Land) legislators have a corresponding margin of appreciation with regard to the structurally similar provisions on emergency borrowing by the Länder (cf. Constitutional Court of the Land Hesse, Judgment of 27 October 2021 - P.St. 2783, P.St. 2827 -, juris, para. 248; Constitutional Court of the Land Rhineland-Palatinate, Judgment of 1 April 2022 - VGH N 7/21 -, juris, para. 110).

144

cc) Beyond that, Art. 115(2) sixth sentence of the Basic Law does not impose further substantive restrictions on crisis-related borrowing by the Federation. In particular, the budgetary legislator is not bound by the principle of proportionality. Rather, it is the legislator’s task to consider and decide among different suitable options for addressing the unusual emergency situation – a decision for which it then bears political responsibility. As far as political action is concerned, the Basic Law only provides a framework and affords the legislator leeway to design as long as there are no interferences with fundamental rights or domains of freedom – which there are not in the present case. Within this framework, the legislator is free to make political decisions.

145

dd) In the present case, this means that although the budgetary legislator’s decision must be suitable to manage the crisis, there is no need to distinguish between several different suitable options in terms of their necessity or appropriateness (cf. BVerfGE 79, 311 <342 f.>; cf. also recently Constitutional Court of the Land Rhineland-Palatinate, Judgment of 1 April 2022 - VGH N 7/21 -, juris, para. 112). Therefore, the Constitutional Court does not need to review whether the crisis-related borrowing was necessary and appropriate ([...]).

146

(1) In particular, the legislator is not constitutionally required to exhaust other options for consolidation before making use of the possibility for emergency borrowing in accordance with Art. 115(2) sixth sentence of the Basic Law (necessity of emergency borrowing). It is solely for Parliament to make the corresponding fundamental (political) decisions and to take into account alternative funding options such as tax increases, other budgetary policy priorities and any reserves. A ‘subsidiarity of borrowing’ cannot be inferred from Art. 115(2) sixth sentence of the Basic Law (cf. Constitutional Court of the Land Rhineland-Palatinate, Judgment of 1 April 2022 - VGH N 7/21 -, juris, para. 113; [...]).

147

The repayment obligation for crisis-related borrowing set out in Art. 115(2) eighth sentence of the Basic Law also suggests that necessity is not a required criterion. In this regard, the Basic Law distinguishes between the actual crisis situation and the time after the crisis has been overcome. During the latter period, the legislator is at least bound by an obligation to repay the borrowed credits within an appropriate period of time. The requirement to make use of any consolidation opportunities is thus essentially shifted to the repayment phase, i.e. to a period when the crisis has been overcome. Only in the period after the natural disaster or unusual emergency situation has been overcome is there a constitutional obligation to consolidate, while the focus in the acute emergency situation is on crisis management. The expansion of the legislator’s leeway through the use of funds from emergency borrowing in times of crisis is followed by a subsequent narrowing in the following fiscal years ([...]).

148

(2) Furthermore, the appropriateness of emergency borrowing is not subject to constitutional review. A constitutional principle of appropriateness with respect to budgetary matters cannot be inferred from the Constitution (cf. for a different view Constitutional Court of the Land Hesse, Judgment of 27 October 2021 - P.St. 2783, P.St. 2827 -, juris, para. 252 with regard to the Hesse Land Constitution; [...]). Nor does the lack of an appropriateness test lead to the possibility of an uncontrollable increase in sovereign debt – which would contradict the objective of Art. 115(2) of the Basic Law. The permissibility of emergency borrowing is dependent on the constituent elements of Art. 115(2) sixth sentence of the Basic Law being met, which is in principle subject to full constitutional review. Only with regard to the legal consequences is the standard of review limited to the criteria of plausibility and tenability, in particular with regard to the assumption of a causal connection. In themselves, the constituent elements of Art. 115(2) sixth sentence of the Basic Law therefore afford protection against unjustified utilisation of the exemption from the debt brake rule – as the Constitution-amending legislator intended.

149

ee) The legislator’s margin of appreciation corresponds to an obligation to satisfy burdens of substantiation in the legislative process (cf. BVerfGE 119, 96 <140>). The reasons given by the legislator enable the Federal Constitutional Court to examine whether the corresponding parliamentary assessment is plausible and tenable in the event of a dispute (cf. BVerfGE 79, 311 <343>; 119, 96 <140 f.>).

150

(1) In the legislative process, the legislator has to substantiate the diagnosis of the natural disaster or unusual emergency situation, explain the causes thereof, and set out its intention of using the increased borrowing to avert or overcome this crisis. The legislator also has to substantiate the prognosis that – and how – this objective can be achieved through the increased borrowing, i.e. it must explain why the increased borrowing appears suitable to remedy the crisis ([...]). Additionally, an approach in which budgetary planning is coordinated with accompanying legislative measures and longer-term policies may need to be substantiated where appropriate. If the budgetary legislator acts in contravention of the currently applicable financial planning, it must justify this decision (cf. with regard to the previous legal situation BVerfGE 79, 311 <345>). The substantiation requirements that the legislator must fulfil in individual cases are determined by the circumstances of each individual case and depend in particular on the nature of the specific crisis situation – and the complexity of solutions to overcome the crisis. The spirit and purpose of the exemption in Art. 115(2) sixth sentence of the Basic Law must always be kept in mind, as this is intended to safeguard the state’s capacity to act for the purpose of crisis management (cf. BTDrucks 16/12410, p. 11).

151

(2) If the legislator makes repeated use of the possibility of emergency borrowing within a fiscal year or in consecutive fiscal years, it also faces more demanding substantiation requirements. The longer a crisis persists and the more extensively the legislator has made use of emergency borrowing, the more detailed reasons the legislator must give as to why the crisis situation is still ongoing (crisis diagnosis) and why its planned crisis management measures continue to be suitable.

152

(3) On the subject of the amount of borrowing authorisations, this is particularly applicable if the approved emergency borrowing was not needed or not needed in full, contrary to the original budgetary planning and the constitutive decision pursuant to Art. 115(2) sixth sentence of the Basic Law, and is now to be used for crisis management measures other than those originally planned.

153

(4) Special requirements for the legislator’s burden of substantiation arise from the need to distinguish emergency borrowing within the meaning of Art. 115(2) sixth sentence of the Basic Law from the scope of the expanded borrowing possibilities arising from Art. 115(2) third sentence of the Basic Law. The latter concerns cases where economic developments deviate from normal economic cycles, with the resulting effects on the budget in periods of upswing and downswing having to be taken into account symmetrically. The wording of the Constitution makes it clear that not every economic crisis situation constitutes an unusual emergency situation. Accordingly, the legislator deciding on budgetary matters also has to include a plausible substantiation of this distinction.

154

(5) The Constitutional Court must review whether the assessment substantiated by the legislator in the course of the legislative process is plausible and tenable (cf. BVerfGE 79, 311 <342>; 119, 96 <140 f.>; […]). This division of tasks between parliamentary legislation on the one hand and review by the Constitutional Court on the other is objectively required when a constitutional authorisation and obligation to borrow is exercised in response to a specific and rapidly evolving situation (cf. Constitutional Court of the Land Rhineland-Palatinate, Judgment of 1 April 2022 - VGH N 7/21 -, juris, para. 106; cf. on the previous legal situation BVerfGE 79, 311 <342>).

155

c) Moreover, the systematic concept of the constitutional requirements applicable to the Federation’s borrowing under Art. 109(3) and Art. 115 of the Basic Law gives rise to the principles of yearly budgeting and annuality, which are supplemented by the current-year principle (Fälligkeit). These budgetary principles also apply to the debt brake rule (see aa) below). The aforementioned budgetary principles must also be observed when an exception from the debt brake rule is invoked on the grounds that a natural disaster or unusual emergency situation pursuant to 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law has occurred (see bb) below) and must not be circumvented by the use of special-purpose funds (see cc) below). The principles of yearly budgeting and annuality are subject to strict constitutional review (see dd) below).

156

aa) The legal means available to the legislator that are provided for by the debt brake provisions in Art. 109(3) first sentence and Art. 115(2) first sentence of the Basic Law, which take into account economic developments that deviate from normal conditions within the meaning of Art. 109(3) second sentence and Art. 115(2) third to fifth sentence of the Basic Law, are subject to the principles of yearly budgeting and annuality. This follows from a systematic interpretation of the constitutional requirements and their normative environment.

157

(1) A first important indication that the principles of yearly budgeting and annuality also apply to the requirements of Art. 109(3) and Art. 115 of the Basic Law can be inferred from the wording of the fundamental decision to prohibit structural new borrowing in Art. 109(3) first sentence of the Basic Law: By stipulating that the budgets of the Federation and the Länder shall, in principle, be balanced without revenue from credits, Art. 109(3) first sentence of the Basic Law links the restriction of state borrowing to state budgetary management and thus also to the general budgetary principle of yearly budgeting pursuant to Art. 110(2) first sentence of the Basic Law (see (a) below) as well as to the related principles of annuality (see (b) below) and the current-year principle (see (c) below).

158

(a) According to the principle of yearly budgeting ([...]) pursuant to Art. 110(2) first sentence of the Basic Law, the federal budget for one or more fiscal years shall be set forth in a law enacted before the beginning of the first year and making separate provision for each year. The general principle of yearly budgeting contained in Art. 110(2) first sentence of the Basic Law serves to safeguard the budgetary powers of Parliament, particularly in view of the fact that longer budget periods would result in the budget losing its informative value and its binding nature ([...]). Moreover, Parliament cannot unilaterally initiate the introduction of supplementary budgets for lack of a corresponding right of initiative ([…]).

159

(b) In functional terms, the principle of yearly budgeting expressly enshrined in Art. 110(2) first sentence of the Basic Law is closely interconnected with the principle of annuality applicable to the implementation of the budget. While the former establishes requirements as to the intervals at which the budget is to be drawn up, the latter addresses the period of validity of the authorisations in the budgets ([…]). The principle of annuality concerns the limitation of the planned period in material (substantive) terms, i.e. it places a time limit on expenditure and borrowing authorisations ([…]). It is laid down in ordinary law in § 27(1) first sentence of the Budgetary Principles Act and § 45(1) first sentence of the Federal Budget Code. Accordingly, the authorisations may only be exercised for the purposes and expenditures specified in the budget, insofar and as long as they continue to be valid, and only until the end of the fiscal year. Once the fiscal year has ended, the authorisations expire without replacement, unless otherwise specified ([…]).

160

(aa) The principle of annuality is not absolute. § 27(1) second sentence, § 27(2) to (4) of the Budgetary Principles Act and § 45(1) second sentence, § 45(2) to (4) of the Federal Budget Code provide for derogations from the principle of annuality, inter alia with regard to unexpended balances, which may under certain conditions remain available for the respective purpose beyond the fiscal year until the end of the second fiscal year following the authorisation. The provisional ‘continued validity’ of borrowing authorisations provided for in Art. 110(4) second sentence of the Basic Law in conjunction with § 18(3) of the Federal Budget Code constitutes another exception from the principle of annuality.

161

(bb) Thus, the principle of annuality primarily addresses the executive in the budget implementation phase. However, it also limits the legislator’s leeway to make decisions regarding the design of the budget. The principle obliges the budgetary legislator to ensure that expenditure authorisations and commitment appropriations cannot generally be carried over from one year to the next. The possibilities to transfer funds to a later fiscal year may be justifiable under constitutional law in individual cases, for example with regard to the principle of efficient administration of public finances. They must, however, remain limited to exceptions ([...]).

162

(cc) The substantive principle of annuality complements the outer limits of the protection of parliamentary budgetary powers established by the principle of yearly budgeting by preventing situations in which past budgetary decisions restrict the budgetary decision-making leeway of future legislators ([…]). It thus prevents the burden from being shifted into the future. ([…]). Due to this close functional interconnection with the principle of yearly budgeting pursuant to Art. 110(2) first sentence of the Basic Law, the principle of annuality also has constitutional status ([…]).

163

(c) While the current-year principle is not explicitly mentioned in the Basic Law, it is essentially provided for in ordinary law in § 8(2) nos. 1 and 2 of the Budgetary Principles Act and § 11(2) nos. 1 and 2 of the Federal Budget Code. The current-year principle concerns the allocation of funds to certain time periods based on when the funds are expected to actually be disbursed and received ([...]). Accordingly, only revenue and expenditure may be budgeted that, in all likelihood, will be effected in the same fiscal year ([…]).

164

(2) By stipulating that the budgets of the Federation and the Länder shall, in principle, be balanced without revenue from credits, Art. 109(3) first sentence of the Basic Law – as the fundamental precept of constitutional public debt law – links the requirements for borrowing to the general budgetary principles of yearly budgeting and annuality as well as to the current-year principle described above. It does so by making reference to the obligation to formally balance the budget in accordance with Art. 110(1) second sentence of the Basic Law ([…]). In this way, the obligation to formally balance the budget in accordance with Art. 110(1) second sentence of the Basic Law is supplemented with a substantive obligation to balance the budget in shape of a prohibition on incurring structural new debt pursuant to Art. 109(3) first sentence of the Basic Law ([…]). It can be concluded from this reference that the requirements for federal borrowing under Art. 109(3) and Art. 115 of the Basic Law must generally also follow the yearly budgeting, annuality and current-year principles. This does not, however, rule out specific modifications in consideration of the factual and functional particularities of the provisions on borrowing.

165

(3) The applicability of the yearly budgeting, annuality and current-year principles in public debt law can also be inferred from the design of the rules on incurring new federal debt pursuant to Art. 109(3) and Art. 115 of the Basic Law. This is because according to the concept of Art. 109(3) and Art. 115 of the Basic Law, public debt law adheres to an annual frame of reference. This becomes particularly apparent in the wording of Art. 115(2) fifth sentence of the Basic Law, according to which the ‘calculation of the yearly limit on net borrowing’ requires a federal law.

166

(a) In the context of requirements for federal borrowing, the principle of yearly budgeting means that the permissible amount of borrowing must be determined separately for each year. After the end of a fiscal year, the permissible amount of net borrowing must be determined anew for the following year.

167

(b) The principle of annuality requires that authorisations which fall within the scope of the permissible net borrowing for a specific fiscal year and are allocated to that year must in principle be used in that year, i.e. borrowing must actually occur.

168

(c) Finally, the phrase ‘yearly limit on net borrowing’ in Art. 115(2) fifth sentence of the Basic Law indicates that, in line with the current-year principle, the point in time at which the borrowing actually occurs is decisive for the temporal allocation of borrowing authorisations to individual years and the corresponding limits for borrowing.

169

(4) This conclusion is further supported by the wording of Art. 115(1) of the Basic Law, insofar as it states that commitments which may lead to expenditures in future fiscal years require authorisation by a federal law. By using the phrase ‘expenditures in future fiscal years’, the Constitution-amending legislator has made clear that limits in public debt law are to have a protective effect over time, staggered by financial year, in favour of future budgets.

170

(5) Teleological considerations further consolidate the conclusion that the regulatory mechanism of the so-called debt brake rule pursuant to Art. 109(3) first sentence in conjunction with Art. 115(2) first sentence of the Basic Law is subject to the yearly budgeting, annuality and current-year principles. The intention of effectively limiting federal sovereign debt and minimising the burden of repayment obligations on future budgets is oriented towards the future and therefore also has a specific temporal dimension.

171

bb) The yearly budgeting, annuality and current-year principles also apply to the exceptions in 109(3) second sentence in conjunction with Art. 115(2) sixth sentence of the Basic Law for natural disasters and unusual emergency situations. It is true that these provisions justify exceeding the yearly limit on net borrowing. However, Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law, as exceptions from the regular limit, remain closely related to the debt brake rule’s yearly calculation procedure.

172

(1) Accordingly, the Bundestag’s decision to exceed the credit limits pursuant to 115(2) sixth sentence of the Basic Law must also be taken for a specific fiscal year. Even the calculation of the regularly applicable debt limit relates to the individual fiscal year. If an emergency situation or its effects persist for a period exceeding one year and result in continuing borrowing requirements, decisions pursuant to Art. 115(2) sixth sentence of the Basic Law must be taken separately by year. Moreover, it is state practice that decisions pursuant to Art. 115(2) sixth sentence of the Basic Law refer to budget or fiscal years; they are taken with reference to a particular budget act or supplementary budget act ([…]). In this way, the exemptions pursuant to Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law take account of the – outer limits established by the – principle of yearly budgeting.

173

(2) The more implementation-oriented principle of annuality requires, in conjunction with the current-year principle, that all borrowing authorisations allocated to a specific fiscal year – if they are to be used – must be effected in the relevant year. Any borrowing must therefore occur in the year for which it was authorised because it is needed for crisis management during that year. After the end of the fiscal year, the respective borrowing authorisations expire. This is because – in contrast to ‘regular’ borrowing authorisations (Art. 110(4) second sentence of the Basic Law in conjunction with § 18(3) of the Federal Budget Code) – the law does not provide for any exceptions from the principles of annuality and yearly budgeting for emergency borrowing authorisations. If it did, the emergency situation declared by the decision of the Bundestag would be separated from the actual borrowing in an impermissible way, although the two are substantively interrelated.

174

cc) The yearly budgeting, annuality and current-year principles may not be abrogated by a legislative design that facilitates the use of borrowing authorisations for legally dependent special-purpose funds (ancillary budgets). The debt brake rule pursuant to Art. 109(3) first sentence and Art. 115(2) of the Basic Law also extends to legally dependent ancillary budgets (see (1) below). Therefore, the general time-related requirements of the debt brake rule in principle remain applicable in relation to special-purpose funds (see (2) below).

175

(1) The debt brake rule pursuant to Art. 109(3) first sentence and Art. 115(2) of the Basic Law also extends to legally dependent ancillary budgets ([...]; cf. on Art. 109(3) of the Basic Law in conjunction with the Constitution of the Land Rhineland-Palatinate: Constitutional Court of the Land Rhineland-Palatinate, Judgment of 1 April 2022 - VerfGH N 7/21-, juris, para. 51).

176

(a) This is indicated by the wording of Art. 109(3) first sentence of the Basic Law, according to which the budgets of the Federation and the Länder are subject to the public debt law rules pursuant to Art. 109(3) of the Basic Law.

177

(b) From a teleological perspective, too, it is appropriate to subject legally dependent ancillary budgets to the debt brake rule for the purpose of effectively limiting new net borrowing. Otherwise, the debt brake rule could be easily circumvented ([...]).

178

(c) This conclusion is supported by an interpretation of Art. 109(3) first sentence and Art. 115(2) of the Basic Law that takes account of the constitutional provisions in force until the reform of public debt law in 2009 and the actions taken by the Constitution-amending legislator in 2009: While the old version of Art. 115(2) of the Basic Law expressly provided for the possibility of exceptions from the limits on federal borrowing pursuant to Art. 115(1) of the Basic Law (old version) to be enacted by federal law with regard to federal special-purpose funds, the public debt law enacted in 2009 does not contain any such provision. It can be concluded that the Constitution-amending legislator deliberately refrained from continuing to allow exceptions for special-purpose funds. At the same time, the old constitutional provision demonstrates that legally dependent special-purpose funds of the Federation were generally subject to the rules on limits for borrowing. Otherwise, the previous express authorisation enabling the federal legislator to provide for exemptions would have been devoid of meaning.

179

(d) Finally, this interpretation is supported by the wording of Art. 143d(1) second sentence of the Basic Law. According to this provision, new borrowing – beyond the borrowing authorisations (existing on 31 December 2010) for special-purpose funds already established – is no longer possible as of 1 January 2011.

180

(2) (a) The fact that the Constitution-amending legislator, when reforming public debt law in 2009, refrained from retaining a provision that corresponded to Art. 115(2) of the Basic Law (old version) – which authorised the legislator to enact exceptions for special-purpose funds – underlined its intention to ensure that the newly created debt brake rule would be implemented, including with regard to the legislative design of financial instruments that involve the establishment and funding of special-purpose funds (cf. BTDrucks 16/12410, p. 7; […]). Consequently, such financial instruments must also be subject to the special time-related restrictions on federal (emergency) borrowing that follow from the yearly budgeting, annuality and current-year principles, which guarantee the effectiveness of the debt brake rule in the first place.

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(b) Accordingly and with regard to the principle of yearly budgeting, any funds transferred to special-purpose funds that were incurred by borrowing on the basis of the exemption for emergency situations may in principle only be used during the fiscal year to which they were allocated by the decision pursuant to Art. 115(2) sixth sentence of the Basic Law.

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For the purposes of the constitutional debt brake rule and the calculation of permissible new borrowing, the core budget and legally dependent special-purpose funds must be considered as a single unit. Irrespective of the accounting procedure, transferring credit-financed funds to a special-purpose fund cannot therefore release the Federation from observing the limits on state borrowing for the respective fiscal year.

183

Otherwise, in fiscal years where specific time-related and circumstance-related reasons give rise to leeway in terms of possible borrowing, the Federation might exercise this leeway far in excess of requirements and then transfer the emergency borrowing authorisations to special-purpose funds in order to ‘save them up’. If, in later years, the constitutional debt brake rule imposes new time-related and circumstance-related requirements, the Federation could still make use of the (originally) emergency-related borrowing authorisations at whim. These would thus be made available for future use beyond the relevant fiscal year, without counting towards the constitutional debt limit for those future years. This is ruled out by Art. 109(3) and Art. 115(2) of the Basic Law. These provisions do not allow the use of accounting techniques to decouple emergency borrowing authorisations from the fiscal year in which the emergency was declared.

184

dd) The time-related requirements that result from the yearly budgeting, annuality and current-year principles and that apply to exceptions from the debt brake rule on the grounds of a natural disaster or unusual emergency situation pursuant to Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law as well as to the use of special-purpose funds are subject to strict constitutional review. This is in line with the Constitution-amending legislator’s intention to effectively enforce public debt law through the 2009 reform. Given the clear protective approach of the newly enacted provisions in Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law and the clear time limits on borrowing authorisations, the legislator is afforded neither a margin of appreciation nor leeway to design in this respect.

185

2. The Second Supplementary Budget Act 2021 must be measured against the standards of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law (see a) below). It is compatible with the written elements of these provisions (see b) below). However, the legislator has failed to sufficiently substantiate the necessary causal connection between the emergency borrowing authorisations and the measures taken to manage the crisis (see c) below). Furthermore, the transfer of borrowing authorisations to the Climate and Transformation Fund within the framework of the Second Supplementary Budget Act 2021 is, with regard to the principles of yearly budgeting and annuality, incompatible with the constitutional requirements for emergency borrowing by the Federation (see d) below).

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a) The central regulatory component of the Second Supplementary Budget Act 2021 is the retroactive increase in the volume of the Energy and Climate Fund (now Climate and Transformation Fund) from EUR 42,694,600,000 to EUR 102,694,600,000. The necessary budgetary leeway to accomplish this was created by the estimated figures for additional global income in the amount of EUR 25 billion and decreases in global spending in the amount of EUR 35 billion. The authorisations granted for net borrowing in the amount of EUR 240,175,714,000 on the basis of the First Supplementary Budget Act 2021 remained unchanged. These borrowing authorisations, granted by the First Supplementary Budget Act 2021 on the basis of the Bundestag’s decision of 23 April 2021 pursuant to Art. 115(2) sixth sentence of the Basic Law had not been fully used to combat the effects of the COVID-19 pandemic as per the authorisation in the First Supplementary Budget Act 2021. They were the basis for transferring a further EUR 60 billion to the Climate and Transformation Fund. Therefore, the Second Supplementary Budget Act 2021 must likewise be measured against the standards established by Art. 109(3) first and second sentence of the Basic Law and Art. 115(2) first, second and sixth sentence of the Basic Law.

187

b) The Second Supplementary Budget Act 2021 complies with the written elements of Art. 115(2) sixth to eighth sentence of the Basic Law.

188

aa) The COVID-19 pandemic with its diverse public health and economic consequences constitutes an emergency situation within the meaning of Art. 115(2) sixth sentence of the Basic Law ([...]).

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bb) This emergency situation was beyond governmental control. From the very beginning, the difficulties associated with a global pandemic and its complex consequences posed challenges for state and society, particularly due to the pandemic’s inherent unpredictability. The development of the COVID-19 pandemic was neither foreseeable, nor was it caused by the state.

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cc) From the beginning of the crisis, combatting the COVID-19 pandemic was linked to an extraordinary need for budgetary resources and thus substantially impaired the state’s financial capacity. Even before taking the first measures in 2020, the legislator had to assume that a global pandemic would have a noticeable impact on the overall budget. By the time the German Bundestag once again declared an emergency situation in April 2021 and the Second Supplementary Budget Act 2021 was passed, nothing had changed in terms of the scale of the challenges associated with state management of the pandemic. There was still a causal link between the crisis and the substantial impairment of the federal budget.

191

dd) By its decision of 23 April 2021, the German Bundestag declared that there was an emergency situation in the 2021 fiscal year pursuant to Art. 115(2) sixth and seventh sentence of the Basic Law – as is required for the authorisation of emergency borrowing (cf. BTDrucks 19/28464 in conjunction with BTDrucks 19/28740). There was no renewed declaration for the 2021 fiscal year and no such renewed declaration was required under constitutional law.

192

ee) The decision was accompanied by a corresponding amortisation plan within the meaning of Art. 115(2) seventh sentence of the Basic Law (cf. BTDrucks 19/28464 in conjunction with BTDrucks 19/28740).

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(1) Given the wording of Art. 115(2) sixth sentence of the Basic Law, the fact that this amortisation plan was adopted in the form of a mere parliamentary resolution and not enacted as a law does not prevent it from being legally effective (cf. para. 113).

194

(2) Finally, there is no indication that the legislator exceeded the margin of appreciation which it is afforded with regard to the appropriateness of the amortisation period ([...]).

195

c) However, the legislator has failed to sufficiently substantiate the causal connection between the declared emergency and the crisis management measures financed by the emergency borrowing.

196

aa) As a starting point, the legislator’s diagnosis of the crisis is plausible. In the explanatory memorandum to the Second Supplementary Budget Act 2021, for instance, the legislator provides an assessment of the economic situation at the end of the year 2021 as a result of the pandemic (cf. BTDrucks 20/300, p. 4). According to the Federal Government’s autumn projections on macro-economic development, economic growth in 2021 would be lower than expected in spring due to shortages in supply caused by the pandemic. The renewed rise in the number of infections and uncertainties due to newly emerged virus variants also posed a high risk for future development. According to the explanatory memorandum, the massive economic slump in 2020 meant that extensive supply and demand-side measures were still required to mitigate the social and economic consequences of the pandemic and put the German economy back on a path of sustainable long-term growth. Increased government investment to support the economy and the promotion of private sector investment were considered key elements in overcoming the consequences of the pandemic. Tax increases or spending cuts, on the other hand, were considered a massive obstacle to the necessary course of sustainable stabilisation.

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bb) However, the legislator did not substantiate the necessity of the specific measures taken.

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(1) In this regard, the Federal Government made reference to its intention of combining support for the economy, which was weakened as a result of the pandemic, with another political objective: the promotion of climate action, transformation and digitalisation. According to the Federal Government, the special circumstances of managing the pandemic required reliable state funding and the promotion of private investment for significant transformation tasks and future challenges in the areas of climate action and digitalisation, which were essential prerequisites for quickly overcoming the effects of the crisis, safeguarding the economy’s competitiveness and thus stimulating and sustainably strengthening economic growth. Many investments in this area had been cancelled due to the pandemic. In the Federal Government’s view, a further increase in public investment was therefore needed in order to encourage targeted private investment in future-oriented fields and initiate a corresponding catch-up process. According to the Federal Government, climate action and phasing out the use of fossil energy sources were of particular importance for sustainably strengthening the economy as it emerged from the pandemic (cf. on the individual measures mentioned in the ‘Binding Explanatory Notes’ BTDrucks 20/400, p. 3).

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(2) This reasoning is not sufficient. By the time of the deliberations on the Second Supplementary Budget Act 2021, the COVID-19 pandemic had already been ongoing for almost two years. The longer ago the event triggering a crisis occurred – thus allowing the legislator more time for decision-making – and the more indirect the effects of the crisis are, the narrower the legislator’s margin of appreciation becomes (cf. para. 138). This also entails stricter requirements regarding the legislator’s burden of substantiation (cf. para. 149 ff.), all the more so when the legislator – as in the present case – makes repeated use of the possibility of emergency borrowing within a fiscal year or in consecutive fiscal years.

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(3) The longer a crisis persists and the more extensively the legislator has made use of emergency borrowing, the more detailed reasons the legislator must give as to why the crisis is still ongoing and why the planned crisis management measures continue to be suitable. In particular, the legislator must demonstrate whether the crisis management measures taken in the past were effective and whether it has drawn conclusions for the suitability of future measures. This applies in particular if, contrary to the original budgetary planning and the constitutive decision pursuant to Art. 115(2) sixth sentence of the Basic Law, the approved emergency borrowing was not needed or not needed in full.

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(a) The explanatory memorandum to the Second Supplementary Budget Act 2021 includes no more than the most basic aspects of such an evaluation and categorisation of the crisis management measures taken up to that point. In this regard, the explanatory memorandum states that the allocations to the Energy and Climate Fund already made in 2020 in connection with the economic stimulus and future technologies package had been ‘tried and tested for pandemic management’ and would be ‘followed up’ (cf. BTDrucks 20/300, p. 4 f.). The funds in question would supplement the funds already transferred to the Energy and Climate Fund for the purpose of addressing the pandemic in 2020, and thus would continue to serve this purpose. According to the explanatory memorandum, developments had shown that the state measures taken thus far to overcome the unusual emergency situation were effective. They were considered suitable, necessary and appropriate to mitigate the acute economic effects of the pandemic and thus secure jobs and income. Following the economic slump in 2020, German gross domestic product was expected to rise again in 2021 and in the years thereafter. Germany had come through the crisis comparatively well so far. Had the extensive stabilisation and support measures not been taken or had the level of funding been less, the economic slump and thus the societal repercussions of the pandemic would have been far more profound.

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(b) Yet there is no discussion of what specific measures were taken by the Energy and Climate Fund as a result of the first allocation to the fund or what (measurable) effects they had. It is therefore not even clear if the Second Supplementary Budget Act 2021 is meant to fund the same measures as the original emergency borrowing authorisations in 2020. The explanatory memorandum also does not elaborate on the assumption that gross domestic product would rise again due to the measures taken.

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(c) The legislator does not provide reasons why the borrowing authorisations deemed necessary in the First Supplementary Budget Act 2021 in the amount of EUR 60 billion were, contrary to the original plan, not used by the end of the 2021 fiscal year – despite the fact that the explanatory memorandum itself refers to the necessity of the previous level of funds. Such reasons were all the more necessary here because almost a year had passed between the declaration of an emergency for the 2021 fiscal year pursuant to Art. 115(2) sixth and seventh sentence of the Basic Law by the Bundestag’s decision of 23 April 2021 (cf. BTDrucks 19/28464 in conjunction with BTDrucks 19/28740) and the adoption of the Second Supplementary Budget Act 2021.

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(d) An in-depth discussion of such reasons was also needed given that the Energy and Climate Fund had been established much earlier, the programmes it financed were determined at that time, and these programmes had not prevented or limited the effects of the crisis (cf. Act for the Establishment of a Special-Purpose ‘Energy and Climate Fund’ of 8 December 2010 <BGBl I p. 1807>). The programmes financed by the special-purpose fund cannot therefore be deemed suitable for crisis management purposes.

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(e) Finally, the explanatory memorandum also fails to clearly distinguish emergency borrowing within the meaning of Art. 115(2) sixth sentence of the Basic Law from the scope of the expanded borrowing possibilities arising from Art. 115(2) third sentence of the Basic Law in cases in which economic developments deviate from normal conditions, where effects on the budget in periods of upswing and downswing must be taken into account symmetrically. The necessity of this distinction follows from the fact that the Bundestag also needs to sufficiently investigate and substantiate the effects of the intended stimulus measures if it wants to make use of Art. 115(2) third sentence of the Basic Law ([…]). Upswings and downswings as part of cyclical economic trends, on the other hand, are not unusual emergency situations within the meaning of 115(2) sixth sentence of the Basic Law (cf. BTDrucks 16/12410, p. 11).

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d) The transfer of borrowing authorisations to the Climate and Transformation Fund provided for by the Second Supplementary Budget Act 2021 also runs counter to the constitutional principles of yearly budgeting and annuality following from Art. 109(3) and Art. 115(2) of the Basic Law:

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aa) Under the overall concept of the Second Supplementary Budget Act 2021, the transferred borrowing authorisations are to be held as de facto reserves over several fiscal periods; this violates the year-based allocation imposed by Art. 109(3) and Art. 115(2) of the Basic Law. The decision to be taken by the Bundestag pursuant to Art. 115(2) sixth sentence of the Basic Law regarding the declaration of an emergency is tied to a specific fiscal year (cf. Art. 115(1) of the Basic Law) and must therefore be taken separately for each fiscal year. Decoupling the emergency borrowing authorisations from the actual use of the borrowed funds is incompatible with the constitutional requirements laid down in Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law. Under these requirements, borrowing authorisations for a specific fiscal year must be limited to covering the expenditures for emergency measures incurred in the same fiscal year. The ‘case’ required by Art. 115(2) sixth sentence of the Basic Law must be declared and accounted for on a yearly basis. Accordingly, the funds are to be used in that specific year.

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bb) The Second Supplementary Budget Act 2021 transfers borrowed funds in the amount of EUR 60 billion to the Climate and Transformation Fund – a legally dependent special-purpose fund of the Federation. While these funds affect the calculations of permissible borrowing for the year 2021, the crisis management measures envisaged by the legislator that are to be financed through the borrowing authorisations are planned to be taken in subsequent fiscal years. Under this conception, the Federation incurs actual debt primarily in subsequent years and it can be expected that such debt will exceed the constitutional debt limit applicable to the respective subsequent fiscal year. The borrowing authorisations created through the Second Supplementary Budget Act 2021 are to be used without them counting towards the debt limit of the subsequent fiscal years, as the borrowing is included in the budget for the exceptional year of 2021 rather than in the budget for the years when the funds are actually borrowed. This is incompatible with the principle of annuality in conjunction with the current-year principle following from Art. 109(3) and Art. 115(2) of the Basic Law.

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cc) Contrary to the view of the Federal Government, neither the particular situation of the COVID-19 pandemic nor the fact that the Federal Government ‘needs the financial resources to assume currently necessary obligations vis-à-vis third parties that require future payments’ are capable of justifying the violation of the standards imposed by Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law.

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(1) It must be conceded that the Federal Government is right when arguing that the COVID-19 pandemic is extraordinary with regard to its global scope and the uncertainty of its development over time. However, this does not give rise to any exceptions from the time-related requirements of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law that would allow for options of longer-term debt financing to overcome the crisis.

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(2) If and to the extent that the constituent elements of emergency borrowing were (again) met in subsequent years, such borrowing would be permissible in the amount necessary at the relevant time. There is therefore no plausible reason for using the borrowing authorisations from the year 2021 to pursue the constitutionally legitimate aim of managing the current and future pandemic, either in respect of whether – or to what extent – these borrowing authorisations should be used.

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(3) This also applies with regard to the Federal Government’s argument that, given the specific emergency situation at issue, there is a need for binding financial obligations to be made through the Federal Government’s utilisation of commitment appropriations in order to stimulate the desired private investments and ensure planning certainty. In this respect, there is no apparent reason why the crisis situation – which according to the Government’s assumptions is a long-term phenomenon – could not be adequately countered with annually repeated declarations within the meaning of Art. 109(3) second sentence and Art. 115(2) sixth sentence of the Basic Law.

II. 

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Finally, the Second Supplementary Budget Act 2021 does not satisfy the requirements regarding the date of adoption of supplementary budget acts following from Art. 110(2) first sentence of the Basic Law.

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1. Due to the principle that the budget must be determined in advance (Vorherigkeitsgebot) pursuant to Art. 110(2) first sentence of the Basic Law, the budget must in principle be set forth in a law enacted before the beginning of the fiscal year.

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a) The principle that the budget must be determined in advance serves to give effect to Parliament’s budgetary powers. It is aimed at safeguarding the temporal dimension of Parliament’s budgetary sovereignty and, in particular, serves to guarantee the budget’s guiding function for the entire fiscal year (cf. BVerfGE 119, 96 <120>). Even if, according to its wording, the principle that the budget must be determined in advance is primarily addressed to the legislator, Parliament is not its only addressee. All constitutional organs involved in the legislative process are required to cooperate to satisfy this principle (cf. BVerfGE 45, 1 <33>; 66, 26 <38>). This includes the Federal Government, which has the sole right to introduce a (supplementary) budget act (cf. BVerfGE 45, 1 <46>). This exclusive power of initiative under budgetary law includes the right and obligation to submit – and thus also to complete the preparatory work for – the drafts of the individual sections of the budget and the general budget in good time (cf. BVerfGE 119, 96 <120 f.>).

216

b) The principle that the budget must be determined in advance generally also applies to supplementary budgets (an issue already addressed but not ultimately resolved in BVerfGE 119, 96 <122 f.>). It is true that the wording of Art. 110(2) first sentence of the Basic Law does not make direct reference to supplementary budgets, which – given their nature – can only be introduced during the course of the relevant fiscal year. However, the purpose of the principle that the budget must be determined in advance – combined with the principle that a budget must provide a complete and reliable account of public finances – is to safeguard the budget act’s effectiveness in steering and managing public finances. It is therefore directed at protecting the budgetary sovereignty of Parliament. Thus, the principle that the budget must be determined in advance must be applied accordingly to the introduction of supplementary budgets. This principle then becomes a constitutional requirement to promptly, and without arbitrary delay, correct or adjust budget decisions that appear, or subsequently prove to be, unrealistic (cf. BVerfGE 119, 96 <122>).

217

c) In the past, the Senate has addressed but not ultimately resolved the question of whether the principle that the budget must be determined in advance has constitutional status in the context of the adoption of supplementary budget acts and what the consequences of the principle’s violation in the adoption of a supplementary budget are (cf. BVerfGE 119, 96 <123 f.>). The starting point for its decision in an earlier case was a constellation in which a supplementary budget act for the 2004 fiscal year had been introduced ‘only in mid-October 2004 instead of at a much earlier date’. The constitutional standard of review in that constellation was the principle of good-faith cooperation between (constitutional) organs (Organtreue), i.e. a principle of mutual consideration that requires constitutional organs to pay due regard to the interests of other constitutional organs in the exercise of their respective powers (cf. BVerfGE 119, 96 <124 f.>). The central issue of the proceedings was the question of whether breaches of the duties of constitutional organs can be invoked in judicial review proceedings (Art. 93(1) no. 2 of the Basic Law), i.e. whether these duties amount to constitutional requirements and therefore have an impact on the budget act as such, or whether these could only be the subject of a dispute between highest federal organs (Organstreit proceedings, Art. 93(1) no. 1 of the Basic Law; cf. BVerfGE 119, 96 <122 f.>). The Senate was not able to establish a corresponding breach of duty on the part of the Federal Government. The Senate did not therefore need to decide on the question.

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d) In contrast, the present case does not concern a breach of duty on account of the ‘delayed’ adoption of a supplementary budget before the end of the current fiscal year. Rather, it concerns the adoption of a supplementary budget act for 2021 only after the 2021 fiscal year had already ended.

219

aa) Under ordinary law, § 33 second sentence of the Federal Budget Code provides that the Government must introduce any supplementary budget bill by the end of the respective fiscal year. However, the consensus in legal scholarship is that this provision must be interpreted in conformity with the Constitution to the effect that Parliament must have adopted any supplementary budget bill by the end of the year, because it would otherwise be void ([…]).

220

bb) This view is supported by the point that a supplementary budget is intended to adjust the original planning to new or changed needs and, for this reason – as shown by § 33 first sentence of the Federal Budget Code and 45(1) of the Federal Budget Code –, the supplementary budget itself must serve planning purposes for the rest of the current fiscal year ([…]). If a supplementary budget is only adopted once the fiscal year has ended, it cannot serve such planning purposes. The implementation of the budget has already been concluded and can no longer be influenced ([...]).The parliamentary adoption of a supplementary budget bill after the conclusion of a fiscal year thus runs counter to the budget’s function as a planning tool. A supplementary budget bill that is adopted after the expiration of the fiscal year at issue is therefore no longer a valid or effective instrument to retroactively change the implementation of the adopted budget (cf. Statement of the Federal Court of Audit regarding the Second Draft Supplementary Budget 2021, p. 7). Budget acts and the corresponding budgets are supposed to steer state revenue and expenditure for the respective fiscal year. Once the fiscal year has ended, it is generally no longer possible to steer revenue and expenditure because ‘it is not possible to make retroactive expenditures or enter into retroactive obligations’ ([...]). There are therefore no grounds for retroactively covering such measures by borrowing authorisations or financing them through borrowed credits.

221

cc) Given the systematic concept of Art. 111 of the Basic Law, violations of the principle that the budget must be determined in advance that occur in relation to the primary budget do not result in sanctions; however, this does not apply to a late supplementary budget. When no budget has yet been adopted for a given period, Art. 111 of the Basic Law grants the Federal Government certain emergency budgetary powers to enable it to provisionally manage financial and economic affairs. However, there is no provision corresponding to Art. 111 of the Basic Law that would apply to a late supplementary budget ([...]).

222

2. Measured against these standards, the Second Supplementary Budget Act 2021 is incompatible with Art. 110(2) first sentence of the Basic Law.

223

a) The Second Supplementary Budget Act 2021 was adopted by the German Bundestag on 27 January 2022 and promulgated in the Federal Law Gazette on 25 February 2022. The adoption of the Second Supplementary Budget Act 2021 after the end of the 2021 fiscal year is therefore incompatible with the constitutional principle that the budget must be determined in advance following from Art. 110(2) first sentence of the Basic Law. This principle is not merely an expression of the duties of the involved constitutional organs, but a constitutionally justiciable requirement for a supplementary budget act.

224

b) The fact that the Second Supplementary Budget Act, in effecting retroactive changes to the 2021 Budget Act, fails to serve the mandatory function as a planning tool follows from the explanatory memorandum itself. In the explanatory memorandum, the Federal Government points out that state measures to combat the pandemic can no longer be implemented for the 2021 fiscal year (cf. BTDrucks 20/300, p. 5).

225

c) Notwithstanding the question of whether such a violation could be justified under any circumstances, reasons for such justification have not been given, nor are they otherwise ascertainable.

226

aa) The draft act does not contain any statements to this effect. There was no compelling factual reason requiring the enactment of a supplementary budget act, because if budgetary corrections are necessary after the conclusion of a fiscal year, these are not supposed to be made as part of a supplementary budget, but instead should be taken into account in the budget for the following year ([...]). This can be achieved either by updating the draft budget act for the following year, if it is still in the process of parliamentary deliberations, or by introducing a supplementary budget act to the budget act for the following year, if the latter has already been adopted.

227

bb) Contrary to the Federal Government’s view, the fact that the German Bundestag’s budgetary powers are unlikely to be impaired in light of the relevant procedures does not warrant a different result. The principle that the budget must be determined in advance – combined with the principle that a budget must provide a complete and reliable account of public finances – is aimed at safeguarding the budget act’s effectiveness in steering and managing public finances. It is therefore directed at protecting the budgetary sovereignty of Parliament. In the case of supplementary budget acts, the principle that the budget must be determined in advance then becomes a constitutional requirement to promptly, and without arbitrary delay, correct or adjust budget decisions that appear, or subsequently prove to be, unrealistic (cf. BVerfGE 119, 96 <122>). If a supplementary budget is only adopted once the fiscal year has ended, it can logically no longer play a role in steering and managing the public finances of that year.

228

cc) The need to ensure planning certainty for private investors, which was advanced as an argument by the Federal Government, could have been met – albeit with a certain delay – by adding the relevant provisions to the 2022 annual budget, which was already being planned anyway.

III. 

229

It therefore need not be decided here whether the extensive use of global estimates also violates the principles of budgetary clarity and reliability pursuant to Art. 110(1) first sentence of the Basic Law.

D. 

230

Given that Arts. 1 and 2 of the Second Supplementary Budget Act 2021 are incompatible with Art. 109(3) second sentence, Art. 115(2) sixth sentence and Art. 110(2) first sentence of the Basic Law, the Act is declared void.

231

There is no reason for a declaration of incompatibility that deviates from the fundamental provision in § 95(3) first sentence in conjunction with § 78 first sentence of the Federal Constitutional Court Act since the relevant prerequisites according to the case-law of the Federal Constitutional Court (see BVerfGE 105, 73 <133>) have not been met.