Advisory Board of the Stability Council warns against erosion of the debt brake

As a member of the Advisory Board of the Stability Council, Prof. Volker Wieland has warned against undermining the debt brake. In a statement, the independent advisory board criticized the fact that the exemption clause is also to apply to 2022 due to the Corona pandemic, thereby invalidating the debt brake. In the view of the Advisory Council, there is no need for this. In addition, the Advisory Council doubts that the coalition will be able to meet the structural deficit targets again in 2024.

The Stability Council is of the opinion that an exceptional emergency situation can again be identified for 2022. The Advisory Board, however, sees no reason to do so. The European Commission's latest forecast also shows a strong upswing for 2022, it said in its statement. "For next year, the projection includes hardly any Corona measures and the federal government sees a strong recovery. The output gap is supposed to close next year," criticized Prof. Thiess Büttner, chairman of the advisory board, via Twitter.

In 2024, according to the Stability and Growth Council, the European medium-term budgetary objective - a general government structural deficit of no more than 0.5 percent of gross domestic product (GDP) - should then be met again. The Advisory Board also questions this. The new federal government has announced extensive measures that significantly change the outlook, the Board complains. It therefore assumes that the deficit ratio will be significantly higher, at least from 2023. "In particular, it appears doubtful that the 0.5 percent limit will be met again in 2024," it says.

In addition, the Advisory Board warns against measures to circumvent the debt brake. In the coalition agreement, the new federal government set itself the goal of complying with the regular upper limit of the debt brake from 2023. Apparently, however, application principles were to be changed for this purpose in order to nevertheless significantly expand the financing leeway. "This threatens to effectively undermine the debt brake and weaken its binding effect." It contradicts the intention of the debt brake and poses considerable constitutional risks to use the currently applicable exception clause to finance or pre-finance non-crisis-related measures, the Advissory Board warns, and opposes the transfer of state tasks to public companies with the aim of circumventing the debt brake.

The Stability Council (Stabilitätsrat) is a joint body of the German Federation (Bund) and the federal states (Länder). It was established in 2010 as part of the second stage of Germany’s federal reforms and is enshrined in Article 109a of the Basic Law (Grundgesetz), Germany’s constitution. Together with Germany’s debt brake rules, the Stability Council strengthens the institutional framework for safeguarding the long-term sustainability of public budgets on the federal and Länder levels.

One of the Stability Council’s main tasks is to monitor the budgets of the Federation and Länder on a regular basis. The Council’s purpose is to recognize impending budgetary emergencies at an early stage so that appropriate counter-measures can be initiated in a timely manner. Furthermore, the Stability Council plays an important role with regard to compliance with the EU requirements for budgetary discipline, which also apply to Germany. In particular, the Council monitors the budgets of the Federation, Länder, local authorities and social insurance funds, to make sure that these, taken together, comply with the upper limit for the general government structural deficit of 0.5% of gross domestic product, as stipulated in the Budgetary Principles Act.

The Stability Council Advisory Board is an independent body of experts. It assists the Stability Council in carrying out its task of monitoring compliance with the upper limit on the general government structural deficit.


Written statement of the Advisory Board of the Stability Council: 17. Stellungnahme vom 7. Dezember 2021

Press reports:
Reuters: "Stabilitätsrat erwartet ab 2024 wieder normale Finanzen in Deutschland"
FAZ: "Lindner startet mit heikler Mission"