Germany's balanced budget amendment (German: Schuldenbremse) is a fiscal rule enacted in 2009. The law, which is in Article 109, paragraph 3 and Article 115 of the Basic Law, Germany's constitution, is designed to restrict structural budget deficits at the federal level and limit the issuance of government debt.
Historyedit
The amendment was enacted because the nation's debt-to-GDP ratio exceeded the 60% threshold fixed in the Maastricht Treaty, primarily a result of the heavy payments to reconstruct former communist Eastern Germany after reunification and a loss of tax revenue during the Great Recession. The law required a change to the constitution and in 2009, it was approved with a two-thirds majority both by the Bundestag and the Bundesrat, under the Grand coalition of the First Merkel cabinet.[1] At the federal level, the law limited the budget deficit to 0.35% of the GDP beginning in 2016 and German states that approved the law were prohibited from taking on debt after 2020.[2] Three states, Berlin, Mecklenburg-Vorpommern and Schleswig-Holstein, did not establish the law in their constitutions.[3] In the years prior to the Covid pandemic, the law helped reduce Germany's debt to 59.5% of GDP.[4] The balanced budget amendment is not absolute and allows the country to exceed the borrowing limits during a national emergency or a recession.
The amendment was suspended in 2020 to allow the country to deal with the costs of the COVID-19 pandemic in Germany and was set to come back into force in 2023.[4][5][6]
Although the mechanism was successful in its stated goal, reducing government borrowing, it was criticized by left-of-center parties including the Social Democrats and the Greens, which suggested that the law limited necessary government investment. During the 2021 German federal election campaign, the Greens proposed reforming the rule to allow spending on infrastructure, healthcare and education.[7] In 2022, the government, led by Chancellor Olaf Scholz, succeeded in obtaining the two-thirds majority necessary to amend the debt ceiling to allow Germany to establish a 100 billion euro defense fund that would not be subject to the restrictions. The change was spurred by the 2022 Russian invasion of Ukraine.[8]
In December 2021, via an amendment to the original budget for 2021,[9] the ruling traffic light coalition reallocated €60 billion of unused funds intended to combat the COVID-19 pandemic to its Climate and Transformation Fund [de] (KTF) for climate and green industry projects. On November 15, 2023, the Federal Constitutional Court, having been prompted by the opposition CDU/CSU conservative alliance, ruled this maneuver to be unconstitutional. The ruling prompted a discussion about whether the amendment in its current form would still be appropriate, with even some conservatives calling for a reform to raise the relatively weak level of investment, compared to European neighbors, which had prevailed for several years.[1] On November 27, the cabinet agreed to extend the lifting of the amendment to 2023.[6]
german, balanced, budget, amendment, germany, balanced, budget, amendment, german, schuldenbremse, fiscal, rule, enacted, 2009, which, article, paragraph, article, basic, germany, constitution, designed, restrict, structural, budget, deficits, federal, level, . Germany s balanced budget amendment German Schuldenbremse is a fiscal rule enacted in 2009 The law which is in Article 109 paragraph 3 and Article 115 of the Basic Law Germany s constitution is designed to restrict structural budget deficits at the federal level and limit the issuance of government debt History editThe amendment was enacted because the nation s debt to GDP ratio exceeded the 60 threshold fixed in the Maastricht Treaty primarily a result of the heavy payments to reconstruct former communist Eastern Germany after reunification and a loss of tax revenue during the Great Recession The law required a change to the constitution and in 2009 it was approved with a two thirds majority both by the Bundestag and the Bundesrat under the Grand coalition of the First Merkel cabinet 1 At the federal level the law limited the budget deficit to 0 35 of the GDP beginning in 2016 and German states that approved the law were prohibited from taking on debt after 2020 2 Three states Berlin Mecklenburg Vorpommern and Schleswig Holstein did not establish the law in their constitutions 3 In the years prior to the Covid pandemic the law helped reduce Germany s debt to 59 5 of GDP 4 The balanced budget amendment is not absolute and allows the country to exceed the borrowing limits during a national emergency or a recession The amendment was suspended in 2020 to allow the country to deal with the costs of the COVID 19 pandemic in Germany and was set to come back into force in 2023 4 5 6 Although the mechanism was successful in its stated goal reducing government borrowing it was criticized by left of center parties including the Social Democrats and the Greens which suggested that the law limited necessary government investment During the 2021 German federal election campaign the Greens proposed reforming the rule to allow spending on infrastructure healthcare and education 7 In 2022 the government led by Chancellor Olaf Scholz succeeded in obtaining the two thirds majority necessary to amend the debt ceiling to allow Germany to establish a 100 billion euro defense fund that would not be subject to the restrictions The change was spurred by the 2022 Russian invasion of Ukraine 8 In December 2021 via an amendment to the original budget for 2021 9 the ruling traffic light coalition reallocated 60 billion of unused funds intended to combat the COVID 19 pandemic to its Climate and Transformation Fund de KTF for climate and green industry projects On November 15 2023 the Federal Constitutional Court having been prompted by the opposition CDU CSU conservative alliance ruled this maneuver to be unconstitutional The ruling prompted a discussion about whether the amendment in its current form would still be appropriate with even some conservatives calling for a reform to raise the relatively weak level of investment compared to European neighbors which had prevailed for several years 1 On November 27 the cabinet agreed to extend the lifting of the amendment to 2023 6 See also editDebt to GDP ratio Structural and cyclical deficit Government budget balanceReferences edit a b Rinke Andreas Marsh Sarah 2023 11 26 Germany s budget crisis spurs calls to change its borrowing limits Reuters Retrieved 2023 11 26 Germany s debt brake surveillance by the Stability Council PDF Bundesbank April 2019 Retrieved 2022 06 18 Schuldenbremse erhalt Verfassungsrang Frankfurter Allgemeine Zeitung in German 2009 06 12 a b The end of the German debt brake Economist Intelligence Unit 2021 03 01 Olaf Scholz plots a way round Germany s debt rules Financial Times 2021 12 06 a b Germany s cabinet agrees to lift debt brake again for 2023 Deutsche Welle 2023 11 27 Retrieved 2023 11 27 Germany s Greens clash with finance minister over return to debt brake Reuters 2021 05 12 Germany approves 100bn fund to modernise its armed forces Financial Times 2022 06 03 Martinez Maria Kraemer Christian 2023 11 15 German court deals 60 billion euro budget blow to Scholz government Reuters Retrieved 2023 11 28 nbsp This Germany related article is a stub You can help Wikipedia by expanding it vte Retrieved from https en wikipedia org w index php title German balanced budget amendment amp oldid 1203967411, wikipedia, wiki, book, books, library,
