Austerity and the political economy of the german debt brake

Arne Heise

No 106, ZÖSS-Discussion Papers from University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS)

Abstract: The recent judgment of the German Federal Constitutional Court has clarified that the debt brake enshrined in the German Basic Law (Grundgesetz) is intended to do exactly what the legislature intended when it was adopted in 2009: to tie the hands of political actors and block the 'easy way out through debt.' This not only intensifies calls for the abolition or reform of the debt brake, but also raises the question being examined here of how such a restrictive fiscal policy rule could become a constitutional norm in the face of its scientific and political controversy, especially when its 'natural opponents'-left-leaning political actors- consistently held constitutional veto positions. Based on the Agenda Theory of Political Economy, it is demonstrated that the 'Third Wayism' of the German Social Democratic Party (SPD) as an adaptation strategy to a neoliberal discourse environment was the necessary precondition for a fiscal decision of 'historical significance.'

Keywords: Fiscal rules; Debt brake; Sound Finance; Functional Finance; Political Economy (search for similar items in EconPapers)
JEL-codes: H30 H60 H62 P10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cessdp:300690

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