Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/182514 
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 105/2018
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
Both the German federal as well as the general government recorded a surplus for the fourth time in a row in 2017. The fast consolidation after the Great Recession coincided with the transition period for the full introduction of the federal debt brake, which is sometimes interpreted as causality. At the same time Germany's economic performance is better than that of many other countries. For this reason it is nearly impossible to overrate the symbolic power of the debt brake as a seeming success story. In this paper we scrutinise the seeming success story of the debt brake. We carry out a comparative analysis of the "structural" consolidation of public finances in Germany for the period from 1991 until 2017 showing that the German debt brake is not the cause of the successful budget consolidation in Germany since 2010. The improvement of the general government finances since 2010 was smaller than in previous consolidation phases and was strongly supported by a favourable macroeconomic environment, and one-off effects. Finally, neither the general government sector nor the federal government would be in such a good fiscal shape, had the economy evolved less favourably since 2010. Without the blessing of a strong upswing Germany would hardly have become the fiscal role model for Europe and the German debt brake would not have become the blueprint for the European Fiscal Compact.
Subjects: 
Germany
debt brake
consolidation
Euro crisis
sovereign debt
JEL: 
E39
E62
H50
H62
H74
Document Type: 
Working Paper

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