Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66119
Authors: 
Ciaglia, Sarah
Heinemann, Friedrich
Year of Publication: 
2012
Series/Report no.: 
ZEW Discussion Papers 12-067
Abstract: 
In 2009, Germany introduced a new debt rule in its federal constitution (Grundgesetz). The socalled 'debt brake' prescribes a balanced budget for both the federal level and the states. However, the states have leeway regarding transposition and specification of the national requirements into their own state constitutions and budgetary laws. This analysis presents a comprehensive comparison of the 16 state provisions. We develop an indicator which quantifies the stringency of state rules (Strength of Fiscal Rule Indicator). Two results emerge: First, despite the common constitutional rule at the federal level, the analysis reveals a considerable heterogeneity across German states. Second, several highly indebted states miss the chance to make their fiscal regime more credible. This finding corresponds to the disincentives of the German federation. Due to bailout-guarantees enshrined in German federalism, German states do not have incentives to impress bond markets through particularly strict budgetary rules.
Subjects: 
fiscal rules
debt brake
Germany
fiscal federalism
JEL: 
H63
H74
H77
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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