THE STATE

New Economy Working Paper out – A new paradigm for Germany’s fiscal policy after Corona

A new study by Michael Hüther (IW Köln) and Jens Südekum (DICE) looks into the past and the future of the German debt brake.

BY

MARC ADAM

PUBLISHED

16. NOVEMBER 2020

READING TIME

2 MIN

The study commissioned by Forum New Economy examines the fiscal policy framework that has shaped Germany’s economic policy over the past decades and how it should be redesigned to handle the enormous challenge confronting the German economy in the face of the COVID-19 crisis.

Jens Südekum (Düsseldorf Institute for Competition Economics) and Michael Hüther (Institut der deutschen Wirtschaft) show how the old paradigm that centered on deficit control and reduced state involvement in the economy caused underinvestment in infrastructure and the worsening of the financial situation in many local municipalities. The authors sketch out a new fiscal policy framework in the context of the current crisis.

The full study, which is now available as a Forum New Economy Working Paper – below, was first presented at the VII New Paradigm Workshop. Watch the presentation of the study with comments by Eric Lonergan, Christian Kastrop, Daniela Gabor and Guntram Wolff below.

PREVIOUS ARTICLE Favorite Readings for a New Paradigm – Autumn 2020
NEXT ARTICLE New Economy Working Paper - Challenge-driven economic policy - A new framework for Germany

ABOUT THE STATE

KNOWLEDGE BASE

For decades, there was a consensus that reducing the role of the state and cutting public debt would generate wealth. This contributed to a chronic underinvestment in education and public infrastructure. New research focuses on establishing when and how governments need to intervene to better contribute to long-term prosperity and to stabilize rather than aggravate economic fluctuations.

ARTICLE OVERVIEW