Focus on budgetary policy: Does Germany break the debt brake?

Focus on budgetary policy: Does Germany break the debt brake?

Laimgrubengasse 10, 1060 Wien, Österreich - On January 17, 2025, the deputy neos club chairman Niki Scherak commented on the positive turn that an EU deficit procedure could be averted. This is an important signal for the finance and business location, which clearly supported NEOS in the coalition negotiations. However, Scherak calls for immediate and focused use of ÖVP and FPÖ to reach the required 18 billion euros in savings via the announced 7-year path. He emphasizes that mere cuts are not sufficient to sustainably renovate the state budget. "A unique lawn mower does not yet put the state budget on healthy legs," he said, criticizing the insufficient measures that have been taken to date. So far, only the bare essentials have been done, which significantly limits the possibilities for social and economic initiatives, such as APA-OTS

In Germany, budgetary policy is also the focus of the political discussion. At the center of the debate is the debt brake, the reform of which is discussed in order to meet important investment needs. Various institutions, including the Bundesbank and the International Monetary Fund, have made suggestions. However, there are concerns that a reform of the debt brake would not necessarily be advantageous, since the recently reformed EU fiscal rules for Germany could be more restrictive. Nevertheless, a policy letter from the Bertelsmann Foundation that the European rules systematically offer more scope for debt-financed expenses than the debt brake. This realization suggests that clever investments and accompanying reforms can increase the growth potential, while the expansion of consumer expenses is significantly limited, with a few exceptions for defense expenditure.