German subsidies for new chip manufacturing plants could be in jeopardy

Alfonso Maruccia

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A hot potato: Germany's Federal Constitutional Court recently ruled that the government's decision to reallocate €60 billion of unused funds from pandemic support to the Climate and Transformation Fund in 2022 was unconstitutional. Plans will need to be reshuffled, and the planned subsidies for Intel, TSMC, and other chip companies could disappear overnight.

The German government aimed to finance the green transition with €60 billion reallocated from unused funds from the Covid-19 pandemic. However, the country's highest court deemed this reallocation measure unconstitutional, as it violated a constitutional provision capping the government's borrowing capacity. Consequently, Germany now faces an outstanding €60 billion deficit in its budget.

Germany is the largest economy and industrial manufacturing nation in Europe, but the decision by the Constitutional Court has essentially removed €60 billion from the government plan to strengthen the country's transition to a greener, more sustainable economy. Berlin authorities have now two choices: they can either find "other means" to make up for the missing funds, or they will be forced to cut some planned allocations within the aforementioned green transition in the state's draft budget for 2024.

The court's ruling is expected to impact subsidies earmarked for new chip manufacturing plants planned by major industry players in Germany. Berlin had committed €10 billion to support Intel's proposed wafer fabrication facility in Magdeburg, located in the state of Saxony-Anhalt. The total investment for this project amounts to €30 billion, meaning that federal funds would cover a significant portion of the overall building cost.

In August, Taiwanese chip foundry TSMC announced a new chip manufacturing venture outside the city of Dresden, collaborating with European chip companies NXP, Infineon, and Bosch. The overall cost for this venture is expected to be €10 billion, with subsidies covering approximately half of that amount.

Michael Kellner, Germany's State Secretary for Economic Affairs, highlights that the absence of previously allocated green transition funds puts both new chip manufacturing ventures at risk. The coalition government, led by Chancellor Olaf Scholz, had also intended to revitalize the solar industry in East Germany using the now-vanished funds.

When questioned about Germany's budget cuts and the future of their European investments, Intel and TSMC have not provided any comments thus far. The Bundestag, Germany's federal parliament, is facing an unprecedented crisis, leading to the suspension of all budget decisions. The government is now contemplating an extreme solution, such as incurring additional debt to compensate for the missing funds.

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Just curious has a government official ever been arrested for defying the courts. I mean the Republicans keep saying they will defy even Supreme court rulings on gerrymandering and I bet at no point will the Supreme Court issue an order to say arrest the leader of the House and Senate Republicans for contempt of court. What if Chancellor Kohl said who cares what the court says, will he actually be arrested?
 
Just curious has a government official ever been arrested for defying the courts. I mean the Republicans keep saying they will defy even Supreme court rulings on gerrymandering and I bet at no point will the Supreme Court issue an order to say arrest the leader of the House and Senate Republicans for contempt of court. What if Chancellor Kohl said who cares what the court says, will he actually be arrested?
Are you conflagrating the US political parties and bodies with the Germans?
 
What if Chancellor Kohl said who cares what the court says, will he actually be arrested?
Short answer no. Andreas Scheuer did exactly this. He signed contracts and put in a safety clause, that the government will pay for everything if the court rules against the contract. He knew that the court was already after his plans when he signed the contract. Well .. at the end the court ruled for half a billion contract fines and he is still free.
 
I wish we had a court like this in the US, that could require the government to live within its means just like everyone else.
That would mean stopping borrowing and paying off 33 trillion debt.
And it would not be them living withing their means, it would be us paying much more in taxes for less.
 
That would mean stopping borrowing and paying off 33 trillion debt.
And it would not be them living withing their means, it would be us paying much more in taxes for less.

I'm not against rational finance, like financing a new court building that will be used for decades to come, so we're basically paying the interest each month instead of rent. That's sensible.

But when we borrow for ordinary operating expenses so our generation can enjoy bonus "extra services" now at the expense (x2, x3) of the next generation later - yes, we should stop doing that. And I wish the generation ahead of me had done it a little less although we're far worse.

Net interest expense is already well out of hand at 16% of government spending, placing it above Health (15%) and not far behind National Defense (19%). It makes no sense for us to be so far in the hole.

There is no possible way to pay off the debt in one year but we can at least stop adding to it, especially in what are basically good years economically speaking.
 
That would mean stopping borrowing and paying off 33 trillion debt.
And it would not be them living withing their means, it would be us paying much more in taxes for less.
Spoiler alert: we will have to pay it anyway, as will our children and grandchildren.

Would you rather try to pay off 33 trillion now, or 200 trillion in 10 years time? Start at 15% of GDP, or wait until it spirals to 50% of GDP before addressing it? Either way, it will come with major budget cuts and, in non clown world, a cut to the ridiculous cost+ contracts that the government hands out to its friends in the private sector.
Are you conflagrating the US political parties and bodies with the Germans?
Yes, he did, because wingcucks gotta make EVERYTHING a red VS blue US thing. The concept of why you dont want to start arresting politicians for doing things that are not illegal flies right over his head. I would hazard a guess that he is one of those people that cheered for the removal of the filibuster from court appointments not understanding why that was part of the senate in the first place.
I wish we had a court like this in the US, that could require the government to live within its means just like everyone else.
It would be nice. I can only imagine what it would be like if politicians were forced to actually BUDGET things, as opposed to simply using taxpayer money for retail therapy via lawmaking.
 
Spoiler alert: we will have to pay it anyway, as will our children and grandchildren.

Would you rather try to pay off 33 trillion now, or 200 trillion in 10 years time? Start at 15% of GDP, or wait until it spirals to 50%
I do not want to wait till it is a dire situation, it is like the most stupid thing someone dealing with finances can do. No matter when, we are all paying it, and those less secure will only pay more.
 
Are you conflagrating the US political parties and bodies with the Germans?
Are you implying that this is a "only in America" situation? It's patently obvious I was using the Republicans as an example and was asking what would happen in Germany, as we know full well nothing will happen in America.
 
That would mean stopping borrowing and paying off 33 trillion debt.
And it would not be them living withing their means, it would be us paying much more in taxes for less.
We wouldn't pay more if MORE people paid which is what happens when the economy is good. It was that way just a few short years ago
 
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