Financial expert defends debt brake: Why compliance with the instrument is important

Financial expert defends debt brake: Why compliance with the instrument is important

According to a report by www.zeit.de,

Federal Finance Minister Christian Lindner (FDP) defended compliance with the debt brake and gave six reasons that, in his opinion, speak against abolishing the instrument. He emphasized that the debt brake is valid constitutional law and protects the state's ability to act. It also forces politicians to set priorities and promotes intergenerational equity because it shifts the burden of national debt to the future.

Lindner also argues that the debt brake does not slow down economic growth because most investments are made in the private sector. However, this must be mobilized through improved framework conditions in order to achieve the desired investments.

The discussion about the debt brake in German politics is lively given the current crisis situation and political demands for reforms. Federal Minister of Economics Robert Habeck (Greens) has questioned the brake and wants to support German industry with billions in aid. The chairwoman of the German Federation of Trade Unions (DGB), Yasmin Fahimi, also spoke out in favor of a reform because, in her opinion, the debt brake would hinder the transformation and become a “brake for the future”.

As a financial expert, it should be noted that the debt brake divides both supporters and critics in politics and business. The impact of a possible abolition or reform on the financial market and the economy would be significant. The framework conditions for investments in the private sector would have to be adjusted accordingly in order to achieve the desired economic stimulus. In addition, easing the debt brake could enable an expansionary financial policy, which is currently restricted due to constitutional regulations. This could lead to a stimulation of the economy and economic development, but also carries the risk of a significant increase in national debt. The discussion about the debt brake in Germany will therefore continue to be intensive and the financial sector will have to be closely monitored.