The debt brake sets strict limits on new federal borrowing. Parts of the SPD and Greens also want to suspend them in 2023 – according to surveys, however, people in Germany see it differently.
In view of the foreseeable burdens on the economy and consumers, Lower Saxony’s Prime Minister Stephan Weil is pressing for a quick decision on suspending the debt brake. As early as the Prime Ministers’ Conference on September 28, agreement should be reached “that we are in an emergency and that we have to suspend the restrictions imposed by the debt brake in this situation,” Weil told the German Press Agency.
It is foreseeable how stressful the year 2023 will be socially and economically. “I can’t imagine that we can get through this situation without at least partially borrowing,” emphasized Weil. “Now is the time when we can still set the course. And we should definitely do that.”
The debt brake anchored in the Basic Law stipulates that the budgets of the federal and state governments are to be balanced without income from loans. There is, however, a leeway that for the federal government amounts to a maximum of 0.35 percent of gross domestic product. In the event of natural disasters or other emergencies, the debt brake can be suspended, which happened in 2020 and 2021 because of the corona pandemic.
In the current energy crisis with drastic price increases, Federal Finance Minister Christian Lindner (FDP) sees no reason to suspend the debt brake again. However, he reserves the right to take such a step as an “ultima ratio”.
On September 28, the Prime Ministers of the federal states will meet with Chancellor Olaf Scholz to discuss the energy crisis. The traffic light coalition in Berlin has decided on a relief package worth 65 billion euros, in which the federal states should also participate.
According to Weil, the costs of the crisis will be significantly higher if the state does not take on debt to intervene even more. He does not expect a coalition dispute with the FDP. “I’m sure it won’t turn into a coalition conflict, but ultimately reason will decide.”
Majority against new debt
A majority of Germans meanwhile thinks that the federal relief packages should not be financed by more new debt. This is shown by the results of a representative survey by the opinion research institute YouGov on behalf of the German Press Agency.
Accordingly, not even one in four (23 percent) would be willing to suspend the debt brake in the coming year. Only eight percent of those surveyed believe that tax increases as an opportunity for redistribution and relief are the right way to go. Eleven percent could gain something from “partial financing via the federal states”. One in ten would have other suggestions. After all, 23 percent of those eligible to vote did not know where the money was supposed to come from or did not provide any information.
The proposal to reduce the staff in the federal ministries and agencies met with very broad support among citizens who spoke out in favor of austerity measures to finance the relief. Making cuts on federal construction projects or cutting back on development cooperation would be less popular among those who think cuts are the way to go. When it comes to transport projects or education, for which the federal states are primarily responsible anyway, hardly anyone thinks it is a good idea to go on an austerity course.
Source: Stern
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