20th 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 20th Statement about the structural government budget deficit.

The main points of the statement are briefly outlined below.

The Independent Advisory Council of the Stability Council has submitted its 20th opinion, which critically assesses the Stability Council's current proposed decision on compliance with the structural general government deficit ceiling.

The use of emergency loans by the Federal Government and the Länder in the coming years as well as the additional borrowing by the Federal Armed Forces Fund will result in substantial general government deficits. The tendency of the Länder to outsource measures to extra budgets (special funds) even beyond the Corona crisis and to justify their loan financing with the fight against emergencies continues. The extra budgets make it possible for deficits to occur in subsequent years as well. The use of extra budgets jeopardises compliance with the European requirements on the structural general government deficit, even if the debt brake of Article 109 of the Basic Law may be formally complied with.

Because the debt brake no longer ensures compliance with the ceiling for the general government deficit, budgetary monitoring and coordination of fiscal policy in the Stability Council are even more important than before the Corona crisis.

From today's perspective, the Council expects macroeconomic developments to be more favourable for public finances. This is also indicated by the recently updated forecast of the Federal Government. On the basis of current developments, the Council expects a significantly lower general government deficit for 2023 than the Stability Council (4¼ % of GDP). For the final year of the projection (2026), a higher deficit ratio than the expected ¾ % is a possibility according to the Council.

The Council does not readily share the Stability Council's conclusion regarding compliance with the European targets. In its view, the planned structural deficit does not sufficiently approach the medium-term budgetary objective (MTO) of 0.5% of GDP.

See here External link for the press release for the 20th Statement (in German).