Forum newsletter: New chancellor, new debt brake?

Dear friends and colleagues, 

Politics sometimes follows curious logic – especially when it comes to major changes in direction. When conservative market liberalism became the guiding principle in the 1980s, it took several years before it was implemented under the conservative Helmut Kohl – which, curiously but true, was only implemented by the Red-Green coalition with the Agenda 2010. Now, with a high probability, Friedrich Merz will become Chancellor – and the debt brake could (finally) be reformed, which has always been primarily a green and left-wing endeavor.

Whether this will happen is still open. Perhaps there will only be a new special fund (for defense), for which the debt brake itself would not need to be reformed. There are several arguments in favor of this. International research has long recognized that fixed rules are rather unsuitable: because reality is far too complex for such rules, they tend to cut investments quickly in critical times. In Germany, there is now a growing consensus that it is fatal if, for example, the federal states are no longer allowed to incur any debt – and then, as is currently the case, they cut hopelessly without being able to spare sensible investments that will only become more expensive later.

What has converged scientifically and politically is also reflected in surveys, in which a majority of people in the country are in favor of reforming the debt brake to secure the future and prevent crises – or simply to repair schools. Finally. Perhaps the evidence is now so great that it has reached those who have previously resisted it – and then it is a conservative chancellor who somehow reforms the debt brake.

The big question in the coming weeks will only be whether it is enough in the long run to create a new special fund – for defense, of course. This would also reduce the pressure to cut in other areas, such as climate protection. But that would be the next ad-hoc solution. What if, by some miracle, there is no longer any threat of war soon, but the next pandemic? Or the next flood disaster? Or a devastating AI accident? A new constitutional amendment for a new special fund?

All the problems with the debt brake show: There is always something. That’s life. This also calls into question the basic assumption of enshrining the debt rule in the constitution: that politics must not be allowed to decide freely because it supposedly always incurs debt. Perhaps we should simply go back to the crazy idea of entrusting elected politicians with the responsibility of deciding when it makes sense to incur debt – and when it does not. Voters can then decide whether that was a good idea.

More on this topic will be available from us in the coming days, for example on the new majority for the reform of the debt brake. This is the topic of our New Economy Short Cut with Dominika Langenmayr, Sebastian Dullien, Holger Schmieding, and Philipp Heimberger – live today at 2 p.m.; and later in the Re-Live (with english subtitles).

Have a nice weekend

Thomas Fricke

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