Beyond the debt brake – Towards a more flexible German fiscal policy?

At the moment, there is much debate about the German debt brake. At the VIII. New Paradigm Workshop, Philippa Sigl-Glöckner and others discussed a proposal for a reform commissioned by the Forum New Economy.

 

What is the normal state of the economy and how is it determined? This question is at the core of the proposal by Philippa Sigl-Glöckner and her colleagues from Dezernat Zukunft for reforming the debt brake. In their study, which was commissioned by the Forum, they develop a proposal on how shifting the focus away from cyclical stabilization to full utilization would allow up to 64 billion euros (2.1% of GDP) more debt – without the need to amend the Basic Law (Grundgesetz).

In a similar direction, but with a different focus, Michael Hüther of IW Cologne and Jens Südekum of the University of Düsseldorf go with their proposal. Also on the panel: Monika Schnitzer, member of the German Council of Economic Experts and Shahin Vallée, German Council on Foreign Relations.

Rewatch the full session on the debt brake here.

Here is the brief summary (in German) of the study by Philippa Sigl-Glöckner et al (2021):

And the slides of their presentation:

In his keynote speech, Shahin Vallée emphasized the possibility of overturning even a law enshrined in the Basic Law, and warned against too many restrictions imposed by the debt brake. Here are his slides on the talk:

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