Germany's fiscal policy stance

Horst Siebert

No 1196, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper analyzes Germany's fiscal policy position. Half of GDP passes through the hands of government, a high debt to GDP ratio limits the maneuvering, and the revenue sharing mechanism prevents a competitive federalism. Most importantly for the future, the federal finance minister has to pick up the deficits that the social security systems leave behind. Transfers from the public budget to the social security systems are large, and since 1998 the elasticity of transfers to nominal GDP is 4. This trend will intensify in an aging society. All these factors weaken the prospects for reform that Germany must undertake in its taxation and expenditure system in view of the changed international conditions.

Keywords: Fiscal Policy; Subsidies; German Unification; Debt; Revenue Sharing; Social Policy (search for similar items in EconPapers)
JEL-codes: E12 E13 H20 I00 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1196

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