18th Statement of the Independent Advisory Board to the Stability Council

The Independent Advisory Board to the Stability Council (Unabhängiger Beirat des Stabilitätsrats)External link, of which Silke Übelmesser is a member,  published its 18th Statement about the structural government budget deficit.

Currently, a structural deficit of 3½ % of economic output is expected. In the following years, the projection foresees a decline in the deficit. The upper limit of ½ % is to be reached at the end of the planning horizon in 2026.

At the European level, the exemption rule adopted in the course of the Corona crisis still applies in 2022. With regard to the national debt limits, the federal government and probably also individual states are planning to make use of the emergency rule again. In the Council's view, this is not sufficiently justified. It remains open to what extent the measures financed by exceptional loans are suitable, necessary and appropriate to counter a concrete emergency situation.

In view of the considerable uncertainty, not least due to the Russian war of aggression on Ukraine, the Council nevertheless does not consider it necessary to adopt corrective measures at present. Since special funds are now also excluded from the federal government's debt brake, and in view of efforts by the Länder to circumvent the regulations, the debt brake is less and less able to ensure compliance with European requirements. The federal government alone has set aside around 5% of GDP for credit-financed measures with special assets and reserves and can thus finance measures by borrowing - outside the debt brake - that lead to considerable deficits far beyond the upper limits.

The concrete implementation of the European fiscal rules by the EU Commission is hardly comprehensible. If Germany's commitment to the rules erodes, it will become increasingly difficult to demand compliance from its European partners. The function of the deficit rules is ultimately to safeguard the common currency - the euro. Credible budget rules are indispensable for the stability of the Eurozone. However, it would be all the more important to secure compliance with the rules in Germany and Europe in the medium term.

See hereExternal link for the press release (in German). See hereExternal link for the 18th Statement (in German).