Fatal Austerity

Stephanie Ettmeier, Alexander Kriwoluzky, Moritz Schularick and Lucas ter Steege

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: This paper quantifies the macroeconomic consequences of the fiscal austerity program that preceded the Nazi power grab in Germany in 1933. Between 1930 and 1932, German Chancellor Heinrich Bruning enacted large expenditure cuts and tax increases against the backdrop of a depressed economy, global trade disintegration, and the rise of political extremism. We use a novel granular fiscal dataset to identify the macroeconomic effects of Bruning's austerity policies. We find that the austerity shocks reduced German GDP by more than four percent and caused an increase in unemployment by almost two million, paving the way for extremist parties' success.

Keywords: Austerity; Germany; Great Depression; Fiscal Policy; Structural Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C32 E62 E65 N14 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-his
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp801

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