What happens if Germany can't decide on a budget for 2024?

Since mid-November, the German government has been grappling with a tricky mathematical problem. 

Thanks to a successful legal challenge by the opposition conservatives against the government's borrowing plans in Germany's highest court, Chancellor Olaf Scholz's three-party coalition of the Social Democrats (SPD), Greens and Free Democrats (FDP) has had to rapidly rethink its budget for 2024.

At the heart of the debate is a €17 billion black hole in the finances that nobody can agree how to fill. 

According to reports in Tagesschau, the government will need to sketch out some kind of a plan by the next cabinet meeting on Wednesday in order to have time for it to pass through parliament before the end of the year.

But with disagreements still raging on, it's possible that the government could miss this tight deadline and go into next year with no official budget on the cards. Many people are asking what impact that could have on public services like schools and immigration centres. 

READ ALSO: EXPLAINED: How deep does the German fear of debt go?

Could Germany see its own 'government shutdown'?

Anyone who follows politics in the United States will know that budget disagreements can send the country hurtling towards genuine calamity. 

If senators in the US can't agree on spending plans, the worst-case scenario is what's known as a government shutdown in which only basic essential functions of the government continue. Most administrative services like processing passports and visa applications stop, public sector workers are told not to come to work and frontline workers such as police and firefighters are expected to work without pay.

Luckily, Germany's constitution is designed to prevent a disaster on this scale from ever happening.

Under the German Basic Law, or Grundgesetz, the government is allowed to keep spending even without a formal budget under what's known as a "provisional budget management" clause. 

In plain English, this means that Germany can continue fulfilling its obligations - like paying government staff and processing visa applications - even before a budget is signed in the law.

If a draft budget is available, the Minister of Finance - in this case Christian Lindner (FDP) - can also authorise money to be doled out according to that budget, though only up to a certain amount.

This means that politicians can gain a little extra leeway when debating the budget without needing to worry about impending doom.

If the cabinet can't agree on a firm solution by Wednesday, what may happen is that ministers simply try and sketch out an agreement in principle with some guidelines for the 2024 budget. These would then be fleshed out in the coming weeks and official passed sometime in January.

Until then, money would be spent according to what had been agreed on by ministers. 

What's being debated right now?

Currently the three most powerful ministers in government - Chancellor Olaf Scholz (SPD), Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens) - are engaged in intensive discussions behind closed doors on how to resolve the latest budget crisis.

The situation has become so urgent that Habeck - one the world's most prominent Greens politician - was forced to cancel his appearance at the COP 28 climate conference in Dubai in order to stay in Germany and take part in the talks. 

READ ALSO: Scholz defends spending as budget crisis rocks Germany

In his latest public statement on the crisis, Lindner identified three areas where cuts could potentially be made in order to find the €17 billion erased from the budget.

The German Finance Ministry in the snow. Will it be lights out for the government if a budget doesn't get passed? Photo: picture alliance/dpa | Fabian Sommer

These are social welfare, international aid and unspecified funding programmes. 

Though nothing firm has been decided yet, a planned increase in Bürgergeld - Germany's long-term unemployment benefits - is one of the main projects in the firing line.

The government had planned to hike these benefits by 12 percent from January 2024, bringing the monthly allowance up to €563 for a single household, in order to compensate for high inflation. 

With inflation recently sinking to around three percent, however, FDP politicians are arguing that this hike is now unnecessary and are calling for it to be scrapped. 

READ ALSO: How Germany's budget crisis could affect you

Opposition to cuts to social spending are likely to come from both the Greens and SPD. Instead, the SPD wants to suspend the constitutional debt brake for 2024 and the Greens want to scrap climate-polluting subsidies such as state support for the coal industry. 

Amid all the disagreement, however, one thing that's almost certain is that energy prices will go up next year for German households.

That's because the government has decided to put an end to its gas and electricity price caps from 2024 and will also scrap €5.5 billion that was intended to subsidise grid fees and shave some money off household energy bills.

Why do they need to save money in the first place?

The current discussions over next year's finances all relate to a decision by the Constitutional Court in mid-November that wiped billions of euros from the national budget.

The court ruled that money borrowed for emergencies outside of the constitutional debt brake could not be repackaged for other purposes. That meant that €60 billion of borrowing during the Covid crisis could not be funnelled into fighting the climate crisis instead. 

Since the government had been counting on this repurposed money, however, the budgets for both 2023 and 2024 were thrown into disarray.

For 2023, Finance Minister Christian Lindner decided to pass a supplementary budget for emergency spending on things like the energy price brake and the fallout of 2021 Aartal valley flood catastrophe.

READ ALSO: Schuldenbremse: What is Germany’s debt brake andhow does it affect residents?

He then wants to ask the Bundestag to put aside the debt brake - a constitutional cap on borrowing - for yet another year. His justification for doing so will be the the joint emergencies of the high energy prices and the natural disaster back in 2021.

However, it is unclear if the government is able to do this again in 2024, leaving ministers scrambling to find a way to come up with an estimated €17 billion of lost funding.