Budget emergency
A budget emergency is understood to be a situation of a public budget in which the budget can only be compensated for by means of its own measures, even in the long term, through increasing national debt . The cause of this are regularly burdens from the past, i.e. high accumulated debts and other obligations, in particular personnel costs .
Difference to national bankruptcy
The budget's ability to control can be lost because, on the one hand, tax revenues cannot be increased indefinitely and, on the other hand, current liabilities have to be serviced in order not to endanger solvency. If these payment obligations are so high that they cannot be covered by current income, the budget cannot be restructured even through spending cuts and it gets out of control. The only way out is an ever increasing net new debt .
Thus, the state of the budget emergency precedes the state's insolvency . In this situation, lenders will have doubts that their loans can be serviced in the future. Therefore, they will charge a risk premium in the form of higher lending rates . In practice, this is done through a deteriorated rating .
Situation in Germany
The Federal Republic of Germany itself, like any other state, can find itself in a budget emergency. However, special features apply to the households of the federal states . In this context, the term budget emergency is also mostly used.
From Article 20.1 of the Basic Law , the Federal Constitutional Court derives the duty of the federal and state governments to stand up for one another financially. Accordingly, Section 12 (4) of the Measures Act provides the possibility of granting supplementary federal allocations in the state financial equalization scheme to compensate for an extreme budget emergency. Section 11 (6) of the Financial Equalization Act, which was in effect until the end of 2004, provided for such federal payments to the states of Bremen and Saarland . The new FAG, which has been in force since 2005, no longer provides for such payments.
Judgment of the Federal Constitutional Court of 1992
In a 1992 judgment, the Federal Constitutional Court of Saarland and Bremen granted a right to redevelopment aid. It found that both countries were in extreme budgetary straits. It used two indicators to determine budgetary emergency:
- The borrowing ratio , ie the ratio of net borrowing to total expenditure of the country;
- The interest-tax ratio , i.e. the ratio of the interest to be paid on the debt to the tax revenue.
In addition, the court classified this situation as an extreme budgetary emergency, as the budgetary restructuring required such high funds that it was hopeless for the countries concerned to generate these funds through tax revenue or normal financial equalization. However, the court did not set any fixed limit values, but only calculated the indicators mentioned for the federal states and determined that in this situation “at least” there is an extreme budgetary emergency.
Judgment of the BVerfG of October 19, 2006 (Berlin lawsuit)
In September 2003, the State of Berlin submitted a regulatory review application to the Federal Constitutional Court with the aim of receiving restructuring aid from the federal government. In its application, Berlin explicitly refers to the judgment of the Constitutional Court of 1992. The values of the indicators established at that time for Saarland and Bremen are sometimes even more dramatic for Berlin. On October 19, 2006, the court rejected the regulatory review request. The court emphasized that restructuring aid from the federal government and the other states was a foreign body in the system of state financial equalization. They could therefore only be granted in absolutely exceptional cases. There could be no restructuring aid if it was only intended to cushion an incorrect financial distribution in the past few years or wrong political decisions. The extreme budget emergency must trigger a federal state of emergency that endangers the existence of the country concerned. This is not the case in the case of Berlin. On the one hand, the financial crisis has not yet assumed such proportions that Berlin's ability to act is paralyzed. On the other hand, Berlin still affords disproportionately high spending in the areas of culture , science and housing subsidies compared to the comparable city-state of Hamburg .
Current procedures
Saarland and Bremen have also filed constitutional suits to continue their restructuring aid.
Situation in the Eurozone
Low nominal and real interest rates since the introduction of the euro have eased the situation for households somewhat. After reunification, they had taken on large debts to finance German unity at high nominal interest rates; these loans have now partially expired and have been replaced by significantly lower-interest loans. There is a sovereign debt crisis in the euro area . Several euro countries are affected, namely the PIIGS countries . On the occasion of the Greek sovereign debt crisis , the countries of the euro zone decided in May 2010 to set up a “euro rescue package ”. The no- bail-out clause agreed before the introduction of the euro was in fact largely overridden by a broad interpretation. In July 2011, the EU set the course to make it a permanent construction (see European Stability Mechanism ).
Web links
- Senator of Finance Berlin on the lawsuit
- Federal government on the financial situation of Berlin (PDF; 573 kB)
Individual evidence
- ↑ a b Judgment of the Federal Constitutional Court of May 27, 1992 (LFA II)
- ↑ Measure Law , bundesfinanzministerium.de, as of June 4, 2009, accessed on August 15, 2020.
- ↑ Financial Equalization Act until 2004 ( Memento of the original of December 12, 2006 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ↑ Financial Equalization Act from 2004 ( Memento of the original from December 12, 2006 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice.
- ^ Judgment of the BVerfG of October 18, 2006 (Berlin lawsuit)
