Serious Fiscal Consequences for Schleswig-Holstein With Supplementary Budget Due to Northvolt's Insolvency
Government unveils additional budget plan. - Extra budget proposal submitted by the administration
The ruling government of Schleswig-Holstein is in a pickle. They've drafted a supplementary budget, but it's a drop in the ocean compared to the financial doghole they're leaping into. FinMin Silke Schneider (Greens) spoke up after a cabinet meeting, admitting that due to delayed Northvolt promotion and lower supply and interest expenses, the need for an emergency loan in 2025 has evaporated.
The root of the issue? The insolvency of the Swedish battery manufacturer Northvolt. The funds for the planned battery factory in Heide, amounting to approximately 136 million euros, are still clouded in uncertainty. If the conditions for the payment of the promised promotion materialize in 2025, the coalition wants to provide the funds via a new authorization basis.
But that's just a fraction of the smack they're taking – the remaining around 135 million euros from the previous emergency loan plus additional needs of around 191 million euros are being budgeted as regular expenses. To make ends meet, the coalition is cutting supply expenses by a whopping 70 million euros and reducing provisions for interest rate risks by 9 million euros.
Now, the budget pressure's gone through the roof. Schneider warns, "[The consolidation pressure remains high.] We'll be huddling with the coalition by year's end to patch up the budget holes." A second supplementary budget's in the works for fall, to refinance the emergency loans from 2024, amounting to around 492 million euros.
These loans aren't getting repaid any time soon; they're just being shuffled around in the budget. To pull that off, Schneider wants to leverage the planned higher borrowing possibilities for states. The Landtag is set to vote on the first supplementary budget in July.
Originally, the black-green state government intended to address this mess in the fall with a supplementary budget. The judges in Schleswig had declared the authorization for taking up emergency loans in the previous budget unconstitutional, as they lacked a constitutional-compliant repayment plan.
But here's the kicker. In 2025, the coalition partially financed the budget with an emergency loan once again. The bottom line? The Northvolt insolvency's crucifying the state's finances.
- Supplementary Budget
- Emergency Loan
- Schleswig-Holstein
- Silke Schneider
- Northvolt
- State Government
- Insolvency
Insights:
- The €600 million emergency loan offered to Northvolt is virtually lost due to the company's insolvency, with minimal-to-none chances of repayment[1].
- The Schleswig-Holstein state government (formerly under Economics Minister Robert Habeck) faces a severe financial blow, owing to significant failures in Northvolt's loan's risk assessment, oversight, and documentation[1].
- Lack of a concrete recovery or repayment plan may weigh heavily on Schleswig-Holstein’s budget, leading to possible supplementary appropriations to manage the aftermath.
- The Swedish battery manufacturer Northvolt’s insolvency signifies a long-term fiscal challenge for the Schleswig-Holstein state government, with no immediate resolution in sight[1].
- The insolvency of Northvolt is causing serious fiscal challenges for the EC country, Schleswig-Holstein, as the €600 million emergency loan offered to the Swedish battery manufacturer is virtually lost and unlikely to be repaid, necessitating potential supplementary budgets.
- To address these financial consequences, the Schleswig-Holstein state government, led by Finance Minister Silke Schneider, is exploring ways to leverage higher borrowing possibilities for states and refinance the emergency loans from 2024, totaling around 492 million euros, in a second supplementary budget.
