Staatsverschuldung und Schuldenbremse (Public debt and the debt brake)

Research Area: Macroeconomics
Researcher: Reimund Mink,
Karl-Heinz Tödter
Date: 1.5.2024
Abstract:

The authors deal with the question of whether the debt brake in its current form is still appropriate or whether it should be modified, reformed, or abolished altogether. Central to this are considerations as to whether “future investments” should be treated differently and defined more broadly in the context of the debt brake than “investment” according to gov-ernment finance statistics and national accounts.

The issue of the sustainability of government finance in Germany and the challenges it will face in the coming years will be addressed first. The authors then present the debt brake in its current form and describe its effectiveness since its introduction in Germany. Furthermore, the proposals for reforming the debt brake that have been discussed in recent months are presented and described in terms of their feasibility. A number of these proposals are then analysed using simulation calculations in seven scenarios. The focus is on the questions of how easing the debt brake will affect the debt ratio in the longer term and how the state's financial budgetary room for manoeuvre will change over time.

As it turns out, the reform proposals examined inhibit debt reduction and increasingly shift the burden of public debt to younger generations, who will already be more heavily burdened by low interest rates, demographic ageing, and the costs of decarbonisation than their parents' generation.

Download PDF
Back to list