Germany's Scholz vows to modernise economy, back Ukraine, despite budget woes
By Andreas Rinke and Miranda Murray
BERLIN (Reuters) — Chancellor Olaf Scholz on Tuesday sought to reassure the German people and businesses that his government would modernise the economy and support vital industries such as chip factories, despite a court ruling that tore a hole in the federal budget.
A constitutional court ruling nearly two weeks ago blocked the government's plans to reallocate unused pandemic funds towards green initiatives and industry support, raising fears Germany's economy could be further weakened.
The verdict also called into question Germany's traditionally strict fiscal policy and sparked warnings that companies could be starved of support to keep them globally competitive against subsidies offered elsewhere.
Speaking to parliament as he grapples with a crisis that has shaken his coalition government, Scholz referenced the COVID pandemic, the war in Ukraine and soaring energy prices.
«It would be a grave and unforgivable mistake to neglect the modernisation of our country in the face of all these acute challenges,» Scholz told the Bundestag in a 25-minute speech.
The country's federal states had the greatest interest in securing investment in areas such as semiconductors, climate-friendly steel production and battery plants, he said, addressing concerns of specific industries who fear losing out.
Scholz said the government would end a scheme to cap energy prices by the end of this year, but promised to act quickly if prices shot up again.
However, he left open the question of whether the government would try to suspend Germany's constitutionally enshrined debt brakes again in 2024, which some in his coalition and union members called for but the opposition might challenge in court.
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