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Habeck's advisers want to soften the debt brake: Will mega-inflation and expensive loans follow?

2023-12-05T14:48:08.947Z

Highlights: Habeck's advisers want to soften the debt brake: Will mega-inflation and expensive loans follow?. The brake is at the heart of the consultations for a constitutional budget for 2024, which is currently being lashed down by Economics Minister Robert Habeck. In order to comply with these requirements, the traffic light coalition must save at least 17 billion euros. The Scientific Advisory Board of the Federal Ministry for Economic Affairs and Energy is in favour of a softening of the Debt brake.



Status: 05.12.2023, 15:35 PM

By: Christoph Gschoßmann

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The Scientific Advisory Board of the Federal Ministry for Economic Affairs and Energy is in favour of a softening of the debt brake. Economists see this as a danger.

Munich – The debt brake – does it help or harm Germans and their economy in the long term? The brake is at the heart of the consultations for a constitutional budget for 2024, which is currently being lashed down by Economics Minister Robert Habeck (Greens), among others. In order to comply with these requirements, the traffic light coalition must save at least 17 billion euros.

For the first time, Habeck's advisers are now calling for a far-reaching reform of the debt brake. In a report, the Scientific Advisory Board of the Federal Ministry for Economic Affairs and Energy criticises the debt brake as creating false incentives for too little government investment. This was reported by the Handelsblatt, among others. On Tuesday (5 December 2023), the report was officially presented in Berlin. The advisory board consists of a committee of scientists who are to advise Habeck independently.

Habeck's advisers endorse 'Golden Rule Plus' for 2024 budget

The experts argue for a realignment of fiscal policy. So far, the German government has mainly relied on debt-financed special funds for investments. The new keyword is now a "Golden Rule Plus" proposed by the advisory board. The debt brake should continue to apply to government consumption expenditure such as social transfers, which sets tight limits on the federal government's new debt. In the case of net investments, on the other hand, it is permissible to incur debts, so that they can be financed. This includes all one-time investments. This would eliminate "distortions" of politics at the expense of the younger generations, the scientists write, according to Handelsblatt.

Scholz, Habeck and Lindner are consternated: According to a survey, the majority of Germans support the debt brake. (Archive photo) © Christoph Soeder/dpa

Habeck considers the debt brake in its current form to be "not intelligent enough". Not only Finance Minister Christian Lindner (FDP), but also Professor Niklas Potrafke of the Ifo Institute argues clearly in favor of the debt brake. He told Bild that the brake would help with the restructuring of the federal budget. Loans can also be obtained more cheaply through the brake. With fewer interest payments, "more money is available for other projects such as roads, schools and climate protection." Veronika Grimm from the University of Erlangen agrees. She told Bild: "This would not be useful for solving the current problems anyway, because a reform would have to be carefully weighed up and would require a lot of time and expertise."

Former ifo President Hans-Werner Sinn also told Wirtschaftswoche that a softening of government debt limits would risk the return of very high inflation rates. On the other hand, Monika Schnitzer, the chairwoman of the economic community, had shown herself open to exceptions to the debt brake: "A transparent solution could be to justify a new exemption from the debt brake, with the effects of the energy crisis," said the economist of the Düsseldorfer Rheinische Post (RP).

Budget 2024: When will loans be counted against the debt brake?

Whether the supplementary budget of the traffic light coalition will be permissible at all is also a matter of debate among experts appointed by the Bundestag. At a hearing of the Budget Committee on Tuesday, it was disputed whether the federal government would have to change its general accounting system as a result of the Karlsruhe budget ruling. The question is at what point in time loans are counted against the debt brake: when they are approved or when they are actually taken out.

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The Ministry of Finance takes into account the loans in the year in which they were approved. The Federal Court of Auditors, among others, considers this to be unconstitutional. This would conceal deficits amounting to several billion euros. Several legal scholars disagreed at the hearing, arguing that the Federal Constitutional Court had referred exclusively to special funds with emergency loans. The general booking rule is not affected by the ruling.

Karlsruhe had declared the reallocation of 60 billion euros in the 2021 budget null and void. The money had been approved as a Corona loan, but was later to be used for investments in climate protection and the modernization of the economy. The judges ruled that the federal government may not save emergency loans for later years. Loans approved in previous years had been used by the federal government for energy price brakes and flood aid. These are now to be secured retrospectively by declaring a new emergency situation and suspending the debt brake. (CGSC with dpa)

Source: merkur

All news articles on 2023-12-05

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