Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128400
Authors: 
Potrafke, Niklas
Riem, Marina
Schinke, Christoph
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5696
Abstract: 
In 2009 a new law on German debt brakes was passed: state governments are not allowed to run structural deficits after 2020. Consolidation strategies initiated today influence if a state can comply with the debt brake in 2020. We describe to what extent government ideology predicts if state governments consolidate budgets and which fiscal adjustment path they choose. Attitudes towards budget consolidation, as expressed by politicians’ words in the public debate, differed among parties. Anecdotal evidence and descriptive statistics indicate that leftwing governments ran on average higher structural deficits than rightwing governments between 2010 and 2014. Primary deficits, however, hardly differed under leftwing and rightwing governments. Revenues of federal taxes were much higher than expected and facilitated budget consolidation. Leftwing governments did not need to run deficits to design generous budgets. It is conceivable that parties confirmed their identity by using expressive rhetoric, but responded to shifts in public opinion after the financial crisis and pursued more sustainable fiscal policies when in office.
Subjects: 
government ideology
public debt
debt brake
balanced-budget rule
constitution
expressive rhetoric
JEL: 
D72
H60
H72
Document Type: 
Working Paper

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