Balanced Budget Requirements and Debt Brakes Feasibility and Enforcement

Werner Heun

German Economic Review, 2014, vol. 15, issue 1, 100-115

Abstract: type="main" xml:id="geer12033-abs-0001">

Balanced budget requirements should achieve fiscal sustainability, avoid a burden on future generations and allow for flexible reactions to cyclical fluctuations in the economy. There are many types of balanced budget requirements and debt limitations with different stringency. These budget restraints have a significant effect when they are applicable. The overall effect on public debt is small since there are many ways to circumvent or evade the restraints. Therefore budget restraints have substantial negative side effects. Public debt is transferred into less controllable budget areas, the structure of governments becomes fragmented and the balance of power is shifted away from the democratically accountable legislature.

Date: 2014
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German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin

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