Die Zukunft der Schuldenbremse nach der Pandemie

The German constitutional fiscal rule (the „debt brake“) is increasingly subject to a reform debate that has intensified with the fiscal fallout from the Covid-19 pandemic. This article presents survey evidence from the German state parliaments on views and preferences for the future of Germany’s fiscal rule. The survey among all 16 state parliaments was conducted between May and July 2020 with a participation of almost 30 per cent of all state parliamentarians. The results indicate that the debt brake still enjoys a large general support from more than two thirds of the parliamentarians. However, a reform in the direction of an investment clause is increasingly popular, much more than a clause that would support debt-financed climate policy measures.

Europe, the Euro and German Demographic Renewal

Access to the domestic market is nowadays the trump card of trade diplomacy. The larger the domestic market, the more effective it is. The euro is thus the decisive pillar of the European single market. The German debt brake is incompatible with the long-term stability of the euro. For as long as it applies, full employment can never be achieved in the eurozone as a whole. Under currentfiscal policy, full employment would require unrealistically high export surpluses. A euro doomed to underemployment will collapse. Hence, the international fiscal order must also be applied among the nation states in the euroarea. Germany’s resulting obligations offer an opportunity for a German demographic renewal by aggressively encouraging the immigration of skilled workers.

Appendix: Two Faces of Public Debt

Firstly, Germany has a highly developed welfare state. Secondly, the free exchange of goods, all across Europe and indeed all around the world, is a key element of the German economic system. Thirdly, to the acclaim of voters, German policy is committed to the goal of price stability. Is the debt brake compatible with these three guiding principles of German economic policy? I doubt it. In the German discussion, public debt is only seen in a negative light—wrongly, as I will show.

Concluding Remarks on Economic Policy

The German debt brake is not compatible with the long-term stability of the euro. “New thinking” requires that public debt and price stability are no longer opponents, but rather allies in the Keynes world of persistently low interest rates. The proposed balanced account agreement is made more concrete here: An appropriate target (real) interest rate on the global capital market is between one and 1.5% per year lower than the growth rate of the OECD plus China region. If the actual interest rate is below the target rate, the countries with current account surpluses undertake to increase their public debt periodD gradually according to a definite formula. In symmetrical fashion, if the real interest rate is “too high,” countries with current account deficits have the duty to reduce their public debt period. The rules of the balanced account agreement replace the debt brake. They are the instruments of soundfiscal policy.

Auswirkungen der Schuldenbremse im Privatrecht

The German "debt brake" was introduced to limit government debt. This book examines whether violations of the debt brake have an impact on state loans or bonds. The author comes to the conclusion that the debt brake constitutes a prohibition law within the meaning of Sec. 134 of the German Civil Code (BGB) and illustrates the consequences for public financing: the affected loans may be null and void and the parties must make restitution under unjust enrichment law. Based on these findings, the author argues that (potential) creditors have an interest to monitor government borrowing. "Private enforcement" of the debt brake is therefore possible.

The German Debt Brake Approaches for an Improvement of the Technical Design

Summary: This article examines the German debt brake from a technical point of view. By designing the debt brake on the basis of the EU method, it should be possible to achieve an adequate division between the cyclical and structural components of the budget balance, while at the same time pursuing a countercyclical fiscal policy. However, recent studies suggest that the mechanics of the debt brake are of a rather pro-cyclical in nature. This paper focuses on the behavior of the NAWRU – a central element of the production function approach – as well as revisions, which both seem to be a source of a pro-cyclical influence towards the German debt brake. Additionally, reform proposals are outlined which show that a change of the Basic Law is not necessary in order to improve the dynamics of the fiscal rule at hand.