PoliticsDebt brake and relief package - how does this...

Debt brake and relief package – how does this work?


Aid packages, aid and now the energy price brake. How will all this be financed, and what does this mean for the debt brake?

It was an announcement that put citizens and businesses at ease. A historic step in one of the biggest crises of confidence in post-war history: the energy price brake.

200 billion euros. In government speech it is succinctly referred to as the “double bang”. With all the enthusiasm for the measures, the question of funding has become an almost trivial matter.

Creativity needed in the treasury

With all due respect, the various financial difficulties mean that a finance minister must be creative to do his job right now. Especially if the ministry is run by an FDP politician. The party’s finance minister is, so to speak, the guardian of the debt brake.

Ironically, a special occasion is appropriate for him now, which means, purely official, that the debt brake could likely be observed again next year.

In the so-called state of emergency article of Article 115 of the Constitution, “In natural disasters or extraordinary emergencies that are not in the hands of the state and that significantly affect the state’s finances, these upper credit limits may be increased. They were exceeded based on the decision of the majority of the members of the Federal Assembly.” Russia’s war of aggression with all its consequences was already classified as such an emergency in June.

Even then, 140 billion euros were approved for new debt, burying the debt brake for 2022. Now with the additional 200 billion euros, the point is “just” to “deepen” the decision, so to speak. The Bundestag will undoubtedly accept this and give the government new credit powers.

Debt brake 2023 may be complied with again

Even when the funds are paid out is irrelevant. “The government is going to spend a lot next year, but that’s irrelevant for the debt brake because the private fund runs out in 2022,” says Jens Boysen-Hogrefe of the World Economics Institute.

In plain language, this means that the debt brake can be met again in 2023, because the resulting debt is all about the year the private fund was agreed upon. What is completely irrelevant is that most of the money will not flow to companies or consumers until next year. To some extent, the fact that the state will have to raise significantly more money in the capital market over the next few years to be able to pay off its new debts can be ignored.

Source: ZDF


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