Reform the Debt Brake – Editorial by Tobias Kisling on the Federal Budget
Once again, the drama begins: hardly has the Ministry of Finance announced constitutional concerns about accounting tricks in the budget plan, when the demands start pouring in. Some want to save, others want to suspend the debt brake, and still others act as if there are no legal doubts.
The latter is absurd. With a budget the size of 481 billion euros, the coalition should be able to make savings of four to eight billion euros without risking a constitutional breach, as was the case with the 2021 supplementary budget. Suspending the debt brake is not a justification. However, this does not mean that the debt brake itself does not need reform. Germany has a need for renovation in all areas, be it in schools, the digitization of public administration, or in the road and rail network. The housing market is so tense that it is becoming an increasingly important economic factor when professionals cannot find a place to live. In addition, defense spending is increasing in these times of crisis.
Compared to other major industrial nations, Germany’s level of debt is low. Even international economists have been surprised lately by the straitjacket that Germany imposes on itself. The categorical refusal by the Free Democratic Party (FDP) to engage in a serious debate on reform is long outdated.
However, in the short term, the liberals are correct: savings are needed in the 2025 budget – and not accounting tricks. This includes a non-ideological examination of where current social expenditures create false incentives and correcting them.
