Excessive emergency loans, late repayments and shadow budgets

style="float: right; margin-bottom: 10px; font-weight: 600;"Mon 6th Dec, 2021

The Berlin Court of Audit has called on the red-green-red coalition for more transparency in finances and a tougher austerity course before it starts government. At the same time, the president of the Court of Audit, Karin Klingen, warned on Monday at the presentation of the annual report 2021 not to overstretch the declaration of a Corona emergency to circumvent the debt brake.

As a result of the corona crisis, debt in Berlin's state budget reached a record level of 63.7 billion euros at the end of 2020. The reason is newly raised, pandemic-related loans of 7.3 billion euros, the House of Representatives had cleared the way for this in 2020 by declaring an extraordinary emergency situation.

However, according to the Court of Audit, such high loans were not at all necessary to cope with the pandemic in 2020; according to the auditors, half a billion euros in emergency loans would have sufficed. In addition, the Court of Audit criticized the state for parking 5.4 billion euros of the emergency loans in a pandemic reserve for subsequent years in order to spend the money on other purposes.

"The emergency loans must not be used to finance additional measures that were always desired, but must be used to combat the emergency," said ACA President Klingen.

More than 4 billion euros from the emergency loans have not yet been spent, a small part has been used to finance university buildings, for example, although they have nothing to do with the corona emergency. The "lump-sum savings" of these emergency loans "violates budgetary law," said Klingen.

The debt brake provides for emergencies in which loans and higher debts can be taken out, he said. But these credits may only be used to combat the emergency and not for other political goals.

Also with a view to the future red-green-red coalition of the old and new alliance partners SPD, Greens and Left, the Court of Audit urges a clearer austerity course. The coalition's goal of presenting a balanced budget by the end of the 2026 legislative term is "not ambitious enough.

This includes the considerations of the future government alliance in the coalition agreement not to start repaying the emergency loans until the end of the legislative period. The consideration of only repaying the loans if they are not exhausted is also criticized by the auditors.

So far, the plans call for balancing the 2022/23 budget by using all reserves, they say. For the two subsequent years, there are funding gaps of 2.7 billion euros each, they say. For a "sustainable and generationally fair financial policy," Berlin must return to balanced budgets and a reduction in debt geared to the economy.

The Court of Auditors is also casting serious doubt on the coalition's handling of finances at state-owned companies. The reason for this is the announcement that the losses of the state-owned companies will be cushioned in the 2022/23 budget by renewed emergency loans, even though there are still billions in the pandemic reserve.

The situation is similar for investments. These are to be stepped up, which is also praised by the Court of Auditors. But here, too, the state wants to make an effort on the part of state companies. "We see plans to shift investment activity to areas outside the core budget as problematic," Klingen said.

At the same time, Klingen warned of the consequences of this shadow budget practice to cover investments. "If, for example, state companies or special funds take out loans for this purpose, this not only increases their debt levels but also the state's financial risk," Klingen said.

In addition to the state's record debt of 63.7 billion euros, there is also the debt of the state's companies, funds and institutions. These have risen significantly in recent years and amounted to 21.5 billion euros in 2020. Per capita debt has also risen: From around 20,100 euros in 2019 to 22,150 euros last year - 10,000 euros more per capita than the average for the federal states.

Circumventing the debt brake by outsourcing borrowing to funds, subsidiary budgets and other constructs should be avoided. For this reason, the Court of Audit will examine such outsourcing of loans and investments in state companies more closely in the future.Because of the special challenges, the red-green-red coalition must now be specific about the financing of its plans, because the alliance partners "are also setting the course for dealing with the high debt in the future," Klingen said. "This will have implications for several generations."

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