The Economic Distortions of the Federal Constitutional Court’s Debt Brake Decision

Abstract

Germany is not facing a debt crisis, but rather a serious budget crisis triggered by the ‘debt brake’ ruling of the Federal Constitutional Court (FCC). This crisis is deeper than the 60 billion in unused "Corona debts" being shifted to a climate fund, as reported in the media. More fundamentally, the court has mandated that the federal budget strictly adhere to the "principle of annuality" (Jährlichkeit). This is the most significant impact of the court's ruling, and from an economic perspective, it is quite perplexing.

Keywords

• Debt Brake
• Haushaltsrecht
• Schuldenbremse
• Wirtschaftspolitik
• economic policy
• Wirtschaftspolitik