German government blocks economic stabilization fund -source

BERLIN (Reuters) - Germany's government has blocked spending from the country's economic stabilisation fund for this year after a constitutional court ruling last week, a source close to the finance ministry said on Tuesday.

Chancellor Olaf Scholz's government is scrambling to work out a full response to the court ruling which barred the government from transferring 60 billion euros ($65.44 billion) in unused funds from the pandemic to green projects.

Credit authorisations for the economic stabilisation fund (ESF) can "no longer be used in 2023 according to the current legal situation," finance ministry state secretary Werner Gatzer said in a letter on Tuesday to other ministries, seen by Reuters.

To avoid further burdening the budget for this year and for future years, all spending that has not yet been used in 2023 plans is blocked with immediate effect and requires the consent of the finance ministry, the letter said. Previously, the budget committee could give approval.

Payments linked to the energy price brake for this year are not affected, said the source close to the finance ministry.

The ESF was created in 2020 with the aim of supporting companies through the coronavirus pandemic but has since last year focused on the energy crisis.

Handelsblatt business daily first reported the ESF move.

($1 = 0.9168 euros)

(Reporting by Holger Hansen; Writing by Madeline Chambers; editing by Matthias Williams and Susan Fenton)