Thursday, March 14, 2013

Schuldenbremse

For an American, there are occasions that you marvel over what Germans quietly create and don't brag much about.  One of those odd things....is Schuldenbremse....otherwise known as the debt-brake (in German).

Back in 2009, the Germans decided to alter their Constitution.  They wanted a mechanism which would force everyone in the Bundestag to respect financial responsibility   The intention?  You had to have a balanced budget, and then maintain it.   They were wise enough at the time to direct it at both the federal government, and even the state government apparatus.

So there was a timing device built into this.  You had to accomplish a balanced budget by 2015....which they currently are on track to accomplish.  I know....most Americans would be shocked by such a device.

After 2015?  That's the curious part of this mechanism.  The German federal government is then forbidden from going past .35 of the German GDP.   The state government apparatus is given a few more years but they are locked into place by 2020.

The Bundestag swore an oath at that point.  Unless there is a certified national emergency....like earthquakes or massive floating or French folks invading.....they can't get off the hook for this.  I should add....they also wrote up an exception for a national economic crisis.....which probably will be tested a time or two over the next decade.

Why does this topic come up now?  Well....the French are a bit sour about this entire austerity business and think it hurts more than it helps.  The German balanced budget is not that agreeable with half the countries in the EU presently....who have kinda spent themselves into fairly big mess.

An American can look at this tool and be fairly shocked at the extent and noble goal in mind.  Economic experts wrote the German standard and wrote enough exceptions to get out of it.....if necessary.  But Germans are pressuring themselves to stick with the goal and look for constant reasons to skip balanced budgets.

Sequestration is about the only tool that we can create, and it's more of a bulldozer than a fine steak knife when it comes to talking budgets.

So when you hear a German discussing matters, and he tosses out schuldenbremse....it literally means debt-brake, and it's a significant part of German national budget planning.




2 comments:

Thomas De Petro said...

Good explanation of a typically heavy-handed German solution.

Skeptiker said...

good explanation of a typically overly complex German solution