15 Years Of Fiscal Discipline

Germany's Balanced Budget Amendment

15 Years of Fiscal Discipline

Germany's balanced budget amendment, known as the Schuldenbremse, has been enshrined in the country's Basic Law for 15 years. Enacted in 2009, the amendment aims to ensure the long-term sustainability of public finances by prohibiting structural deficits for the federal government and capping them for state governments.

Background and Purpose

The Schuldenbremse was introduced in response to concerns about rising public debt and the potential risks it posed to the stability of the German economy. By mandating balanced budgets, the amendment seeks to:

• Limit government borrowing and reduce the burden of debt on future generations
• Foster fiscal responsibility and prevent excessive spending
• Preserve the financial flexibility of the government to respond to economic challenges

Key Provisions

The Schuldenbremse establishes specific rules for government borrowing:

• The federal government's structural deficit is limited to 0.35% of GDP
• State governments are prohibited from running structural deficits
• Exceptions are allowed in exceptional circumstances, such as natural disasters or severe economic downturn