Debt brake

from Wikipedia, the free encyclopedia
Structural deficits of European countries in% of GDP

Constitutional provisions and international treaties to limit government budget deficits and national debts are referred to as the debt brake . Debt brakes oblige governments and parliaments to adhere to debt limits. In some cases, they also decide to make up for a temporary violation of these requirements.

Exemptions from debt brakes are typically only permitted for special cases such as economic depression, natural disasters and states of war. In some debt brakes, an exception is also possible with a qualified majority approval by parliament.

Switzerland

After a referendum in 2001, the Swiss debt brake came into force in December 2001 . This constitutional regulation obliges the federal government to keep income and expenditure in balance throughout the business cycle (Art. 126, Paragraph 1 of the Swiss Federal Constitution); excesses must be resolved by the Federal Assembly (Paragraph 3) and compensated for in subsequent years (4th ). Switzerland was the first country to opt for a constitutionally anchored debt brake.

EU countries

In the Stability and Growth Pact of the European Union, the member states undertake in principle to borrow a maximum of 3% of the gross domestic product (GDP) and a debt level of a maximum of 60% of the gross domestic product. However, not all EU member states complied with these requirements , which is why the European Fiscal Compact was adopted and signed on March 2, 2012 by the respective government representatives (25 of the 27 EU states). The tax treaty (“SKS Treaty”) is valid from January 1, 2013: 17 EU countries (13 euro countries) have ratified so far. Financial sanctions are possible from January 1, 2014: Those countries whose deficit (annual new debt) and / or their total debt do not meet the criteria must submit their budget and economic partnership programs with measures to reduce debt to the EU Commission and the European Council and to have them approved.

Bulgaria

Bulgaria is one of the European countries that have introduced a debt brake. In 2010, government spending was 38% of GDP, while government debt is comparatively low at 16.2% of GDP. Nevertheless, the state has now anchored constitutional deficit limits from 2013. Annual new borrowing may then amount to a maximum of 3% of GDP, and annual government spending to 37% of GDP.

Denmark

Local and regional governments (which together account for two thirds of public spending) must have balanced budgets in Denmark and are not allowed to go into debt. There is no limit to the national government. Public debt is very low, at 33% of GDP in 2019.

Germany

In Germany, the debt brake is a constitutional regulation that the Federalism Commission decided at the beginning of 2009 in order to limit Germany's national debt and which has been making binding requirements for reducing the budget deficit since 2011.

France

France failed in its efforts to introduce a debt brake. France's former President Nicolas Sarkozy, together with German Chancellor Angela Merkel, campaigned for the EU-wide introduction of deficit limits. In their own country, however, the surprising success of the Socialist Party in the Senate elections in September 2011 prevented these deficit limits from being set. In contrast to Sarkozy's conservative party, the socialists reject the debt brake. With a majority in the Senate, they can block the introduction of the debt brake. With the election of Hollande as president and the success of the socialists in the parliamentary elections, the chances of introducing a debt brake have decreased significantly.

Italy

The debt brake was implemented by a law of April 20, 2012 in Articles 81, 97, 117 and 119 of the Constitution of the Italian Republic .

Italy's national debt was 119% of GDP in 2010 - 59 percentage points above the intergovernmental 60% agreed in the euro area, i.e. almost twice as high as agreed in the Maastricht criteria in 1992 . In 2011 the state had debts of around 1,900 billion euros. After the economic crisis in 2009/10 , the government under Silvio Berlusconi decided in July 2011 to implement an austerity package worth 48 billion euros. On September 8, 2011, it passed a debt brake and brought a second savings package worth 54.2 billion euros through the Senate. It stated that it was aiming for a balanced national budget (no net new debt ) for 2013 . Berlusconi resigned on November 12, 2011 (also at the urging of some euro countries due to a lack of austerity efforts in the wake of the sovereign debt crisis in the euro area ).

Despite the debt brake that has now been introduced, Berlusconi's successors Mario Monti (he formed his cabinet exclusively from non-party ministers), Enrico Letta , Matteo Renzi and Paolo Gentiloni failed to achieve a balanced national budget (national debt 2012: 1990.11 billion, 2013: 2070.23 billion, 2014: 2137.32 billion, 2015: 2173.35 billion, 2016: 2219.51 billion euros). Benefiting from an unprecedented low interest rate policy by the ECB , Italy was able to replace high-yield government bonds with new low- yield government bonds when they matured. The Conte government, which came into office after the parliamentary elections in March 2018, wants (as of October 18, 2018) to significantly increase net new debt in 2019. The EU Commission has sharply criticized this.

Austria

In Austria, the National Debt Committee submitted studies as early as 2005, which considered the possibility of introducing a debt brake (also based on the Swiss model). However, no particular attention was paid to this study in the general political discussion. It was only in the wake of the European financial crisis, the risk of losing the AAA rating at the time and the widening of the interest rate premium over German government bonds, that the federal government made the proposal to introduce a debt brake in a constitutional provision. Since this required the votes of at least one opposition party, discussions were held in this regard, but neither the BZÖ, which had called for sanction mechanisms, nor the Greens, who wanted a property tax, could be won over to approve the government bill. The debt brake was passed on December 7, 2011 in the National Council with a simple majority in the Federal Budget Act. Furthermore, the federal government has concluded an agreement with the federal states and the municipalities in accordance with Art. 15a B-VG , which represents a debt brake on a level similar to the constitution.

Since 2017, the structural deficit of the Austrian national budget may not exceed 0.45% (exception: natural disasters and “emergency situations”).

On September 25, 2019, the National Council decided to raise the debt brake to constitutional status . On the basis of a joint application and with the votes of the former governing parties ÖVP and FPÖ, as well as the opposition Neos, the bill received the necessary two-thirds majority. The constitutional status required the approval of the federal states, since the debt brake would also have intervened in their powers.

However, in the vote in the Bundesrat, the second chamber of the Austrian Parliament, on October 10, 2019, the two-thirds majority required for anchoring in the constitution was not achieved. Both the members of the SPÖ and the Greens rejected the constitutional amendment in a roll-call vote. They saw investments in infrastructure and planned future projects at risk from the debt brake.

Poland

The Polish Constitution of 1997 limits the debt level to 3/5 of GDP in accordance with Art. 216 IV of the Polish Constitution. In order to maintain this constitutional limit, there is general consensus that the government is obliged to take measures to limit and reduce debt from a debt of 55%.

Sweden

The Swedish government's budgetary target set by parliament aims for an annual budget surplus of 1% of GDP. In 2019, this target was temporarily lowered to 0.33%. National debt must not exceed 35% of GDP. Municipalities must also have a balanced budget. Public debt has been reduced significantly since the 1990s and is now below 40% of GDP.

Slovenia

Slovenia included a debt brake in its constitution in 2013. Since then, the budget must either be in balance or in surplus over a medium-term period. Exceptions are possible in emergency situations.

Spain

In Spain, the constitutional amendment on the debt brake came into force in September 2011. With this, the Spanish government under Zapatero complied with the demands of Chancellor Merkel and French President Sarkozy to constitutionally establish binding deficits and debt limits. In August, Zapatero introduced the debt brake with a "lightning reform". The House of Representatives voted for the law with a clear majority of 316 of the 350 possible votes. With the constitutional amendment, the Spanish government wanted to get the national debt of 60.1% of GDP (2010) under control.

Hong Kong

The Hong Kong Constitution stipulates that income and expenditure must be in balance and that budget deficits should be avoided. In 2019, Hong Kong's national debt was 42.4% of GDP.

United States

In the United States, there is no federal debt brake in the constitution. The maximum permitted debt can be increased by Congress at any time with a simple majority (see fiscal cliff ). In 2018, the government debt ratio was 104% of GDP, making it one of the highest in the world. The cost of interest on debt weighed on the 2019 budget at nearly $ 600 billion a year, or just under 2.5% of GDP.

However, 46 of the 50 states have debt brakes for their own households that differ in their design and severity.

criticism

Reduction of government deficits & reduction of private surpluses

From a Keynesian point of view, the main criticism of a debt brake is that national debt to secure full employment may be necessary not only in the short term, but also in the long term. According to the monetary business cycle theory of John Maynard Keynes, the private sector has to become so impoverished that it is unable to save from its income as soon as the state and abroad (e.g. because of the debt brakes) and the corporate sector (because it finances its investments from profits) may or fail to invest in a crisis) no longer indebted. A debt brake would force permanent underemployment and stagnation in such circumstances. Conversely, permanent surpluses of government revenue over expenditure may also be necessary under other constellations. Therefore, the financial policy must be based on the respective economic requirements.

In January 2013 the chief economist of the IMF Olivier Blanchard said that the IMF had miscalculated and massively underestimated the influence of national austerity policies on economic growth. "Forecasts significantly underestimated the rise in unemployment and the decline in private consumption and investment due to fiscal consolidation." In fact, the gross domestic product is reduced by 1.5 euros for every euro saved. However, Blanchard later had to refrain from this changed view after it became clear that the IMF had again significantly underestimated the UK's growth rates in 2014 because of its austerity policy and had falsely demanded higher government spending. IMF boss Christine Lagarde apologized to the British government.

With respect to the deflationary spiral in the 1930s, explained Wilhelm Lautenbach : "And worst of all is the case that we experienced in 1929, namely, that all major industrialized countries simultaneously . Experienced a radical change in the economy" from the reduction in aggregate demand resulting risk of transregional economic slowdown.

literature

Web links

Individual evidence

  1. ↑ http://www.wirtschaftsblatt.at/home/international/osteuropa/auch-bulgarien-sehen-die-schuldenbremse-459506/index.do ( Memento from February 19, 2011 in the Internet Archive )
  2. ^ Jón Blöndal, Michael Ruffner: Budgeting in Denmark. In: OECD Journal on Budgeting - Volume 4 - No.1 (2004).
  3. ^ Denmark Government Debt to GDP. Retrieved May 2, 2020 .
  4. ↑ http://www.ftd.de/politik/europa/:pleite-bei-senatswahl-sarkozy-kann-schuldenbremse-verschreiben/60109109.html ( Memento from September 29, 2011 in the Internet Archive )
  5. ^ Legge costituzionale 1/2012 (“Introduzione del principio del pareggio di bilancio nella Carta costituzionale”).
  6. ↑ See also PDF of the full text (German translation) and documenti.camera.it: Modifiche agli articoli 97, 117 e 119 della Costituzione, concernenti il ​​rapporto tra l'ordinamento italiano e l'ordinamento dell'Unione europea AC 298 (pdf, 10 October 2018).
  7. ↑ a b de.statista.com
  8. ↑ Debt brake: Italy follows suit. Retrieved May 13, 2019 .
  9. ↑ spiegel.de October 18, 2019: EU Commission denounces "unprecedented debt" - fire letter to Italy
  10. ↑ ec.europa.eu: Letter (pdf) from EU Finance Commissioner Pierre Moscovici and Valdis Dombrovskis to the Italian Finance Minister Giovanni Tria
  11. ^ [1] The Swiss Debt Brake: An Implementation Proposal for Austria Brandner, Frisch, Grossmann, Hauth - Austrian Chamber of Commerce, Wirtschaftspolitische Blätter, Issue 1/2006, Vienna or A Debt Brake for Austria Brandner, Frisch, Grossmann, Hauth - February 2005 or Fiscal Spending Rules in Europe Grossmann, Hauth - Monetary Policy and the Economy Q4 / 05
  12. ↑ Government bill on the debt brake Debt brake in the constitution
  13. ↑ ÖstaP 2012: Austrian Stability Pact 2012
  14. ^ Austrian Stability Pact: Federal Law Gazette. (PDF) Article 4. Structural balance (debt brake). P. 3.
  15. ^ Website of the Austrian National Council: MPs want to pass the last laws on September 25th before the election. September 24, 2019, accessed September 24, 2019 .
  16. ^ Website of the Austrian National Council: Federal Council blocks anchoring the debt brake in the constitution. October 10, 2019, accessed October 10, 2019 .
  17. ↑ Art. 216 IV , Section 10 of the Polish Constitution.
  18. ↑ Swedish government website: About the Swedish fiscal policy framework. July 11, 2018 (English).;
  19. ↑ Leopold Stefan: How Sweden got out of the crisis without debt. 19th October 2016 .;
  20. ^ Sweden Government Debt to GDP.
  21. ^ Slovenian Constitution, Article 148. (English).
  22. ^ Balanced Budget Rule Adopted. December 5, 2014 (English).;
  23. ↑ http://www.handelsblatt.com/politik/international/spanien-fuehrt-schuldenbremse-ein/4569426.html
  24. ↑ Hong Kong Constitution, Article 107. (English).
  25. ↑ Hong Kong SAR, China Government Debt:% of GDP. (English).
  26. ↑ The 20 countries with the highest national debt in 2018 in relation to gross domestic product. Retrieved May 3, 2020 .
  27. ↑ Drew Desilver: 5 facts about the national debt. In: Pew Research Center . July 24, 2019 (English).;
  28. ↑ United States Treasury Department , Interest Expense on the Debt Outstanding. (English).
  29. ↑ Balanced Budget Requirements. November 7, 2017 (English).;
  30. ↑ John Maynard Keynes: General Theory of Employment, Interest and Money , Duncker & Humblot, Berlin 1936/2006 p. 183:
    “The stock of capital and the level of employment will consequently have to shrink until the community is so impoverished that the Total saving has become zero so that the positive saving of some individuals or groups is offset by the negative saving of others. In a society that conforms to our assumptions, the equilibrium must therefore adopt a position under laissez-faire conditions in which employment is low enough and living conditions are sufficiently miserable to bring savings to zero. "
  31. ↑ http://k.web.umkc.edu/keltons/Papers/501/functional%20finance.pdf
  32. ↑ http://epub.ub.uni-muenchen.de/2143/1/schlicht-public-debt-13-RP.pdf
  33. ^ Wiener Zeitung, January 9, 2013: Influence of national austerity policies on economic growth underestimated. IMF miscalculated dramatically. Retrieved January 15, 2013.
  34. ↑ Luise Armitstead: IMF accepts it was wrong on George Osborne's austerity. In: The Daily Telegraph . June 6, 2014 (English).;
  35. ↑ Simon Kennedy: Lagarde Says IMF 'Got It Wrong' on Rallying UK Economy. In: Bloomberg News . June 9, 2014 (English).;
  36. ^ Matthew Holehouse: 'Do I have to go on my knees?': Groveling apology from IMF head for incorrect warnings on UK economy. In: The Daily Telegraph . June 8, 2014 (English).;
  37. ↑ Lautenbach, Wilhelm (Ed. Wolfgang Stützel, 1952): Interest, credit and production. Page 76 (PDF, 231 p .; 1.6 MB) ( Memento of the original from October 17, 2013 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. @1@ 2Template: Webachiv / IABot / www.arno.daastol.com
  38. ↑ Mark Blyth, 2013: Economic Crisis: Finally Stop Doing the Wrong thing! : "If several countries with a single currency, which are mutually their main markets, all cut at the same time, the result can only be a shrinking of the overall economy."