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Economics calls for more flexible debt brakes in times of crisis
According to a report from www.n-tv.de, economists are calling for a reform of the debt brake in order to be able to react more flexibly in times of crisis. The proposal could fundamentally change the way Germany responds to economic emergencies. The economists suggest adjusting the debt brake in three places in order to increase the flexibility of fiscal policy and make future-oriented public spending. The proposed adjustment to the debt brake is intended to make it possible to regulate the transition after an emergency without undermining the sustainability of public finances. To this end, a transition phase should be introduced in which the permissible structural deficit may be above the normal control limit, but should be steadily reduced...
Economics calls for more flexible debt brakes in times of crisis
According to a report by www.n-tv.de, economists are calling for a reform of the debt brake in order to be able to react more flexibly in times of crisis. The proposal could fundamentally change the way Germany responds to economic emergencies. The economists suggest adjusting the debt brake in three places in order to increase the flexibility of fiscal policy and make future-oriented public spending.
The proposed adjustment to the debt brake is intended to make it possible to regulate the transition after an emergency without undermining the sustainability of public finances. To this end, a transition phase should be introduced in which the permissible structural deficit may be above the normal control limit, but must be steadily reduced. Furthermore, the standard limit for the annual structural deficit should be staggered depending on the debt ratio and increased if ratios are low. In addition, a methodological improvement of the economic adjustment is proposed in order to enable a more cyclical financial policy.
These reform proposals could have a significant impact on the German financial market. Easing the debt brake in times of crisis could lead to an increased national debt ratio. This could result in investors and capital markets becoming more cautious due to concerns about government finances. In the long term, easing the debt brake could also affect confidence in the stability of the German economy and the country's credit rating.
However, the economists' proposal could also have positive effects by enabling necessary investments in infrastructure, digitalization and climate protection to be made without the debt brake preventing them. This could strengthen Germany's economic growth and competitiveness in the long term. However, measures would need to be taken to ensure that easing the debt brake does not lead to excessive debt, which would endanger the sustainability of public finances in the long term.
Read the source article at www.n-tv.de