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Debt brake in the Basic Law: dispute escalates
The debate about the reform of the debt brake is heating up the parties' tempers. A dispute over the Emperor's beard that could last for a long time. #Debt brake #Reform #Politics
Debt brake in the Basic Law: dispute escalates
The debate on the debt brake has led to tensions between various political parties. The SPD and the Greens are pushing for a possible expansion of national debt, while the FDP is taking a wait-and-see approach. The CDU is showing disagreement, with the party leadership under Friedrich Merz arguing against reforming the debt brake, while easing exercises are already taking place at the state level.
It's not about abolishing the debt brake, but rather about whether and to what extent it should be expanded to allow for higher borrowing. The SPD proposes a return to the so-called “golden rule,” in which debt is tied to investment. The economists and the scientific advisory board of the Ministry of Economics have also expressed similar views.
The future of the debt brake remains unclear for the time being, and the dispute could last until the federal election in September 2025. It is believed that debt brake reform will be a point in the next government's coalition agreement.
It is being discussed whether the current debt brake system should be retained or a return to the previous commitment to investment. A possible realignment of the debt brake is seen as more flexible and could include various adjustments, such as a change in the exit from high loan financing in emergencies or a higher debt ceiling for the federal government.
A discussion in a reform committee could bring benefits by reducing open dispute and leading a substantive debate. In addition, potential blockade situations after the federal election could be avoided. A reform commission of the Bundestag and Bundesrat could help prepare a solid two-thirds majority for a possible reform.