Prof. Dr. Christoph Gröpl

Lehrstuhl für Staats- und Verwaltungsrecht

The new German ‘Debt Brake‘—a constitutional attempt to restrain state indebtedness

Prof. Dr. Christoph Gröpl · Debt Brake 22

Israelpublic debt: € 54 bn(≈ $ 78 bn)

’Debt Brake‘

≈ € 7,000 per capitapopulation: 7.6 m

Germanypublic debt: € 2,000 bn(≈ $ 2,908 bn)population: 82 m≈ € 24,000 per capita

Prof. Dr. Christoph Gröpl · Debt Brake 33

Hierarchy of Norms(national level)

Constitution

’Debt Brake‘

other acts of State

Parliamentary Acts

Prof. Dr. Christoph Gröpl · Debt Brake 44

Art. 115 par. 1 Basic Law (version 1969)

[…] Revenue obtained by borrowing shall not exceed the total of investment expenditures provided for in the budget…

’Debt Brake‘

… exceptions shall be permissible to averta disturbance of the overall economic equilibrium.

FCC: wide range of discretionfor the budgetary legislator

Prof. Dr. Christoph Gröpl · Debt Brake 55

Art. 126 par. 1 TFEU (Lisbon version 2009)

annual deficit limited to 3% GDP

’Debt Brake‘

overall debt restrained to 60% GDP

Problem: lack of enforcement

Prof. Dr. Christoph Gröpl · Debt Brake 66

Art. 109 par. 3 Basic Law (version 2009)The budgets of the Bund and the Länder shall in principle be balanced without revenues from credits.

’Debt Brake‘

(applicability: 2016 [Bund], 2020 [Länder])

Exceptions: deficits in times of downswing to balance

the effects of market developments that deviate from normal conditions

unusual emergency situations beyond governmental control and substantially harmful to the state’s financial capacity

Prof. Dr. Christoph Gröpl · Debt Brake 7

Thank youfor your attention!