Head of the Chancellery: “A reliable corridor for new borrowing” – Germany

Chancellery Minister Helge Braun (CDU) has sparked a heated debate with his move for a constitutional change in the debt brake. However, you have to look closely at what Braun is calling for in his Handelsblatt guest article. In any case, he does not demand a general loosening of the debt brake or even its abolition.

Instead, Braun argues that for a restart of the economy after Corona, there must be “reliable framework conditions” for companies and consumers. It makes sense to stabilize social spending by the end of 2023 and to forego tax increases. Energy prices would also have to go down. All of this is associated with considerable burdens on the federal budget.

The rule should not be weakened in the long run

“Specifically: the debt brake cannot be adhered to in the coming years, even with otherwise strict spending discipline,” writes Braun. The rule, however, should not be weakened in the long run by the legislature declaring a special emergency situation anew every year and thus making higher new debt possible. The Chancellery Minister therefore pleads for an amendment to the constitution “which provides for a limited, reliable degressive corridor for new borrowing for the coming years and a clear date for the return to compliance with the debt rule”. Basically, a stable debt rule is “indispensable and an obligation to future generations,” says Braun.

The debt brake places tight limits on government borrowing. The legislature incorporated them into the constitution in 2009 under the impact of the financial crisis. Since then it has been stated in Article 109: “The budgets of the Federation and the Länder are basically to be balanced without income from loans.” This follows the logic of the European Stability and Growth Pact. This rule has been binding for the federal government since 2016 and for the federal states since 2020. If the economy is normal, the federal government may nevertheless take out new loans amounting to 0.35 percent of economic output each year. In 2019, the year before Corona, that would have corresponded to twelve billion euros. The countries do not have this option.

The federal budget provides for a debt of 180 billion euros for the current year

In the event of natural disasters or “extraordinary emergency situations”, both levels of government can temporarily override the debt brake by means of a parliamentary resolution, which they did in the context of the pandemic. For the current year alone, the federal budget provides for new borrowing of 180 billion euros. The Bundestag must combine such budget resolutions with a repayment plan.

The so-called black zero must be distinguished from the debt brake: This means a state budget without any new debt. From 2014 to 2019, the federal government managed without new loans, although, according to the rules of the debt brake, it could still have incurred a small amount of additional debt. So far, the official line of the federal government has been that the debt brake will be complied with again from 2022.

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