(Bloomberg) -- Germany will pay out €700 million ($762 million) to ensure a battery plant gets built after officials won an exemption from the government’s spending freeze.

The commitment for a Northvolt AB factory is the first granted for a project planned under a special fund for climate transition since a court ruling blocked the financing of that off-budget vehicle.

The move was urgent because otherwise the deal was in jeopardy, according to officials who spoke on condition of anonymity. 

About €564 million of the subsidy will be provided by the federal government, with the rest paid out in several steps by the state of Schleswig Holstein, which will host the facility, according to a statement from the Economy Ministry on Sunday.

The episode illustrates the uphill struggle facing the government as it attempts to push forward its policy agenda while the public finances remain in flux.

The budget freeze was imposed in mid-November by Finance Minister Christian Lindner after Germany’s top court declared the shifting of €60 billion in old Covid-19 aid to climate protection projects to be unconstitutional. 

All new payment obligations were suspended, but exceptions can be approved on an individual basis. Negotiations are currently under way between the coalition partners on how to resolve the impasse, and officials now want to work on pushing through other previously initiated projects as well.

“Securing the funding for Northvolt is an important step towards triggering major private investment that will create added value and jobs in an industry of the future,” Economy Minister Robert Habeck said. “It’s good that we were able to obtain the exemption from the budget freeze. But it is only a first step.”

Stockholm-based Northvolt plans to produce battery cells for e-vehicles at the factory in Heide starting in 2026. The investment needed totals around €4.5 billion and is expected to create around 3,000 jobs.

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