210:
governance, as it limits the accumulation of government debt and promotes balanced budgets. They argue that reducing government borrowing fosters economic stability, encourages private sector investment, and ultimately strengthens
Germany's position within the European Union. Moreover, the CDU/CSU emphasises the importance of honouring budgetary commitments to future generations, framing the debt brake as a mechanism to safeguard their interests.
183:
following the application of the exception clause. Secondly, they suggest that the annual limit for the structural deficit should be contingent upon the level of debt. If the debt falls below a specified threshold, a higher structural deficit would be permissible. Lastly, the experts recommend methodological changes in estimating potential output, a crucial part of calculating the structural deficit.
231:
arguing that it promotes fiscal discipline and credibility in financial markets. However, other more left-leaning parts of the party criticize its firm framework and argue that it negatively influences the government's ability to respond effectively to economic downturns or invest in green technologies and welfare programs. These critics advocate for reforms to make the debt brake more flexible.
878:
222:
emphasizes the need to strike a balance between debt reduction and strategic investments in areas such as infrastructure, education, and innovation. Also, the FDP advocates for structural reforms aimed at enhancing
Germany's economic competitiveness and productivity, viewing them as essential for achieving sustainable budgetary outcomes in the long run.
191:
The debt brake has been controversial since its introduction. At that time numerous German economists spoke out against the introduction of the debt brake in a public letter. German professors remain divided about this issue. A recent report from the Ifo
Institut in Munich shows that 48% of economics
248:
The Left Party (Die Linke) opposes the debt brake altogether, viewing it as a neoliberal austerity measure that undermines social welfare and intensifies inequality. Die Linke advocates for alternative approaches to fiscal policy that prioritize public investment, wealth redistribution, and social
239:
BĂĽndnis 90/Die GrĂĽnen has also expressed mixed views on the debt brake. While the party recognizes the importance of sustainable fiscal policy, it raises concerns about the social and environmental implications of austerity measures enforced by the debt brake. BĂĽndnis 90/Die GrĂĽnen emphasizes the
230:
The Social
Democratic Party (SPD) has a nuanced relationship with the debt brake. While the SPD initially supported its implementation, the party has since become divided over its effectiveness and implications. Some rather conservative factions within the SPD remain supportive of the debt brake,
164:
conservative alliance, ruled this maneuver to be unconstitutional. The ruling prompted a discussion about whether the amendment in its current form would still be appropriate, with even some conservatives calling for a reform to raise the relatively weak level of investment, compared to
European
182:
The German
Council of Economic Experts (GCEE) has advocated for a pragmatic reform aimed at enhancing the flexibility of fiscal policy while safeguarding debt sustainability. Firstly, they propose spreading the process of returning the structural deficit to its regular limit over multiple years
200:
The
Schuldenbremse, or debt brake, has been a pivotal point of contention among major German political parties, displaying diverse economic perspectives on fiscal policy. The positions of these parties regarding the debt brake demonstrate their differing priorities, concerns, and approaches to
173:
The German debt brake has been both lauded and criticized by economists and policymakers alike. Critics argue that the debt brake constraines the government's ability to respond flexibly to economic downturns. Moreover, some contend that the strict austerity measures enforced by the debt brake
209:
The conservative parties, CDU/CSU have historically been a strong advocate of the debt brake. They view it as a necessary tool for maintaining fiscal discipline and ensuring the long-term sustainability of public finances. For the CDU/CSU, the debt brake represents a commitment to responsible
221:
The Free
Democratic Party (FDP) generally supports the debt brake. However, with some reservations. While the FDP acknowledges the importance of fiscal responsibility, it advocates for a more flexible interpretation of the debt brake to accommodate economic fluctuations and crises. The party
108:, did not establish the law in their constitutions. In the years prior to the Covid pandemic, the law helped reduce Germany's debt to 59.5% of GDP. The balanced budget amendment is not absolute and allows the country to exceed the borrowing limits during a national emergency or a recession.
240:
need for investments in renewable energy and climate adaptation to address the looming threat of climate change. They argue that prioritising debt reduction over these priorities neglects crucial long-term investments in sustainability and economic growth.
134:, succeeded in obtaining the two-thirds majority necessary to amend the debt ceiling to allow Germany to establish a 100 billion euro defense fund that would not be subject to the restrictions. The change was spurred by the
249:
justice. They argue that austerity measures enforced by the debt brake disproportionately impact marginalised communities and slow down efforts to achieve inclusive and sustainable economic development.
96:. At the federal level, the law limited the budget deficit to 0.35% of the GDP beginning in 2016 and German states that approved the law were prohibited from taking on debt after 2020. Three states,
824:
566:
749:
213:
At the start of 2024 a debate has sparked within the CDU about a reform of the debt brake. Especially. some
Ministerpräsidenten have recently advocated for a reform.
420:
38:
130:
campaign, the Greens proposed reforming the rule to allow spending on infrastructure, healthcare and education. In 2022, the government, led by
Chancellor
396:
118:
Although the mechanism was successful in its stated goal, reducing government borrowing, it was criticized by left-of-center parties including the
919:
507:
616:
591:
330:
192:
professors oppose a reform of the debt brake, 44% support a reform, and 6% want to abolish it all together. 2% of economists are undecided.
958:
119:
773:
370:
165:
neighbors, which had prevailed for several years. On November 27, the cabinet agreed to extend the lifting of the amendment to 2023.
670:
301:
540:
135:
943:
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45:
at the federal level and limit the issuance of government debt. The rule restricts annual structural deficits to 0.35% of GDP.
953:
480:
281:
157:
127:
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80:. The law required a change to the constitution and in 2009, it was approved with a two-thirds majority both by the
912:
850:
645:
276:
89:
42:
948:
710:
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hinderes long-term growth prospects by causing underinvesting in infrastructure, education, and innovation.
142:
963:
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123:
101:
37:), is a fiscal rule enacted in 2009. The law, which is in Article 109, paragraph 3 and Article 115 of the
905:
69:
93:
73:
85:
48:
The debt brake is controversial among economists. It is supported by a German strand of economics,
617:"Die deutsche Schuldenbremse – Stabilitätsanker oder Investitionsblocker? | Fakten | ifo Institut"
521:
458:
105:
735:
348:
309:
266:
65:
61:
889:
442:
851:"Deutscher Bundestag - AfD-Vorstoß zur Einhaltung der Schuldenbremse stößt auf Widerspruch"
799:
77:
29:
646:"Deutscher Bundestag - Fraktionen positionieren sich zu Schuldenbremse und Investitionen"
145:
reallocated €60 billion of unused funds intended to combat the COVID-19 pandemic to its
485:
111:
The amendment was suspended in 2020 to allow the country to deal with the costs of the
49:
257:
The right-wing party AFD (Alternative fĂĽr Deutschland) is in favor of the debt-brake.
932:
126:, which suggested that the law limited necessary government investment. During the
671:"CDU-geführte Bundesländer streben Reform der Schuldenbremse an • Table.Briefings"
131:
141:
In December 2021, via an amendment to the original budget for 2021, the ruling
877:
313:
81:
68:, primarily a result of the heavy payments to reconstruct former communist
156:(KTF) for climate and green industry projects. On November 15, 2023, the
508:"Germany's Greens clash with finance minister over return to debt brake"
885:
774:""Wir wollen die Schuldenbremse durch eine Investitionsregel ergänzen""
545:
375:
161:
541:"German court deals 60 billion euro budget blow to Scholz government"
97:
695:
371:"Germany's budget crisis spurs calls to change its borrowing limits"
711:"Fraktionstreffen: Wie die SPD die Schuldenbremse reformieren will"
567:"The German debt brake: the merits and limitations of fiscal rules"
397:"Germany's debt brake: surveillance by the Stability Council"
522:"Germany approves €100bn fund to modernise its armed forces"
481:"Germany's cabinet agrees to lift debt brake again for 2023"
331:"Meet the Economist Leading Germany's Battle Against Debt"
893:
302:"Germany's debt brake and the art of fantasy budgeting"
696:"Schuldenbremse Einhalten Und Investitionen Stärken"
459:"Olaf Scholz plots a way round Germany's debt rules"
52:, while other economists have challenged the rule.
539:Martinez, Maria; Kraemer, Christian (2023-11-15).
457:
441:
364:
362:
60:The amendment was enacted because the nation's
115:and was set to come back into force in 2023.
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800:"Die Linke fordert Reform der Schuldenbremse"
475:
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178:The German Council of Economic Experts (GCEE)
8:
369:Rinke, Andreas; Marsh, Sarah (2023-11-26).
920:
906:
446:. Economist Intelligence Unit. 2021-03-01.
160:, having been prompted by the opposition
41:, Germany's constitution, is designed to
825:"Investitionswende statt Schuldenbremse"
64:exceeded the 60% threshold fixed in the
421:"Schuldenbremse erhält Verfassungsrang"
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76:and a loss of tax revenue during the
7:
874:
872:
736:"Neue Regeln fĂĽr die Schuldenbremse"
325:
323:
196:Positions of Germany´s major parties
443:"The end of the German debt brake?"
43:restrict structural budget deficits
892:. You can help Knowledge (XXG) by
14:
187:Discourse among German economists
876:
571:economic-research.bnpparibas.com
136:2022 Russian invasion of Ukraine
349:"What is Germany's debt brake?"
272:Structural and cyclical deficit
147:Climate and Transformation Fund
590:Ă–chsner, Thomas (2010-05-17).
425:Frankfurter Allgemeine Zeitung
1:
592:"Der Protest der Professoren"
282:Government-Household analogy
158:Federal Constitutional Court
128:2021 German federal election
113:COVID-19 pandemic in Germany
980:
871:
201:managing public finances.
23:, also referred to as the
959:Public finance of Germany
277:Government budget balance
21:balanced budget amendment
427:(in German). 2009-06-12.
402:. Bundesbank. April 2019
831:(in German). 2024-03-20
677:(in German). 2024-04-21
623:(in German). 2023-12-08
143:traffic light coalition
944:German economic policy
888:-related article is a
510:. Reuters. 2021-05-12.
102:Mecklenburg-Vorpommern
33:
16:Fiscal rule in Germany
954:Germany national debt
778:BĂśNDNIS 90/DIE GRĂśNEN
235:BĂĽndnis 90/Die GrĂĽnen
754:www.handelsblatt.com
94:First Merkel cabinet
855:Deutscher Bundestag
804:Deutscher Bundestag
650:Deutscher Bundestag
106:Schleswig-Holstein
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267:Debt-to-GDP ratio
66:Maastricht Treaty
62:debt-to-GDP ratio
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738:. 29 April 2024.
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528:. 2022-06-03.
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489:. 2023-11-27
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857:(in German)
806:(in German)
780:(in German)
717:(in German)
675:Table.Media
652:(in German)
598:(in German)
150: [
132:Olaf Scholz
933:Categories
861:2024-04-29
835:2024-04-29
810:2024-04-29
784:2024-04-29
759:2024-04-29
721:2024-04-29
681:2024-04-29
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627:2024-04-28
621:www.ifo.de
602:2024-04-28
576:2024-04-28
552:2023-11-28
493:2023-11-27
406:2022-06-18
382:2023-11-26
288:References
25:debt brake
19:Germany's
829:Die Linke
314:0013-0613
244:Die Linke
169:Discourse
86:Bundesrat
82:Bundestag
39:Basic Law
308:. 2024.
261:See also
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546:Reuters
376:Reuters
355:. 2023.
205:CDU/CSU
162:CDU/CSU
92:of the
56:History
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124:Greens
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217:FDP
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