Future fiscal and debt policies: Germany in the Context of the European Monetary Union

Eckhard Hein and Achim Truger

No 24/2013, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: Currently fiscal policies in Germany seem to be in a very comfortable position and the German Debt Brake is regarded as an institutional precondition for this success and has been exported to the Euro area in the guise of the Fiscal Compact. In this paper we scrutinize German fiscal policies and its new national and European institutional constraints from a macroeconomic perspective. We start by reiterating the requirements for fiscal policies of member countries in a currency union like the Euro area from a Post-Keynesian perspective and examine German fiscal policies in the period from 1999 until 2007 against this theoretical background. We then turn to German fiscal policies during the Great Recession, the German Debt Brake, the Fiscal Compact and future perspectives, and analyse the associated problems and risks. Finally, we discuss alternative scenarios which could avoid the deflationary pressures of the German Debt Brake and the Fiscal Compact on domestic demand and contribute to internally rebalancing the Euro area.

Keywords: fiscal policy; government deficits and debt; debt brake; fiscal compact; Germany; Euro area (search for similar items in EconPapers)
JEL-codes: E61 E62 E64 E65 H62 H63 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:242013

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