Bundesbank President Joachim Nagel called on the German government to resolve the situation on the budget as soon as possible.

“Berlin needs to create clarity for the current 2023 budget and for 2024,” Nagel said at a German central bank youth event in Frankfurt on Saturday. “The latest reports provide hope that this could still be doable this year.”

That would be important as “the most difficult situation would be a long period without clarity” and with open issues and infighting “as this is always bad for financial markets.”

Last week’s ruling by the nation’s top court has thrown Germany’s fiscal planning into turmoil. It’s called into question the use of special off-budget funds and Finance Minister Christian Lindner has been forced to retroactively account for about €42 billion ($46 billion) of new debt earmarked to ease the burden of high electricity and gas prices on households and companies.

Nagel highlighted that the debt brake rules potentially aren’t as rigid as currently implemented and offer more flexibility, while at the same time ensuring that Germany returns to a debt ratio of 60% of economic output “fairly quickly.”

Still, he acknowledged that this is a political decision that needs majorities and that these majorities “have to be mobilized.”

Answering questions from students, Nagel also said:

• European Central Bank rate hikes are showing their impact, but while inflation has slowed, “we’re not yet where we want to be”
• The Bundsbank won’t need state injections for potential losses linked to stimulus-driven bond-buying — “the pockets of central banks are very deep”