German court ruling could hit economic growth next year - source

Germany's budget committee paused final deliberations on the 2024 draft budget early on Friday morning, according to the chief budget officers of the coalition government, after a constitutional court ruling threw negotiations into disarray.

Germany's ruling coalition is scrambling to fix a large hole in its finances after a court ruling blocked the government from transferring 60 billion euros ($65 billion) in unused funds from the pandemic towards green initiatives and industry support, Reuters reports.

The court's decision has increased tensions in Chancellor Olaf Scholz's already fractious three-way coalition, which has seen support slump as it tackles a series of crises and the economy teeters on the brink of recession.

Although the Greens want additional spending, the Free Democrats (FDP), which head the finance ministry, reject additional debt and higher taxes.

"Some of the expenditure planned for the coming year will now have to be cut, which the governing parties are likely to find difficult to agree on," said Commerzbank chief economist Joerg Kraemer.

The contents of the ministries' budgets were finalised during the committee meeting, the budget officers said.

The state gas and electricity price breaks, which were due to expire at the end of the year, have been extended until March 31, 2024, the German news agency dpa reported on Friday.

The European Commission, which must approve the change, only allowed for an extension until the end of March, dpa said, citing the Bundestag's Energy Committee.

Some specific expenditure allocations, however, will be discussed next Thursday in detail, after a special meeting on Tuesday to discuss the impact of the constitutional court ruling.

Final key budget figures and new debt figures will be made public after the meeting next Thursday, instead of this week as previously expected.