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The Bundesrat vote did not undo Germany’s ratification of the fiscal pact last June. But the delay to codifying how the state governments will contribute to achieving Germany’s budget goals were a setback for a chancellor, who last year cajoled European partners to agree and quickly implement stricter rules.
Social Democrats and Greens hold power in a majority of German states and thus the Bundesrat. They accuse Ms Merkel’s coalition of Christian Democrats and Free Democrats of reneging on this summer’s deal reached on the fiscal pact. The so-called “red-green” states kicked the bill into a conference of the upper and lower houses of parliament, which will aim to hammer out a compromise, ideally before the parliamentary recess late June or the election itself on 22 September.
The red-green majority in the Bundesrat also wants the states to be absolved from stricter budget consolidation and contributing to any fines from the EU, which would put more onus on the federal government to deliver on its pledges to the EU. On top of that, the states want certain federal subsidies increased after 2014.
As both Social Democrats and Greens backed the fiscal pact, it will be hard for the states to hold out for long. Like many spats between Berlin and the states, this one seems financial rather than ideological, suggesting federal money will resolve it.
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