Temporary measures and off-budget activities – developments in Germany

Over the first years of this century, Germany’s public finances developed very unfavourably. Significant pressures to reduce the overall budget deficit emerged. However, not least given the budgetary autonomy of the individual federal states and their influence on federal legislation, for several years central government failed to bring the German deficit ratio back below the Maastricht threshold by means of consolidation measures. Recourse to temporary measures remained limited, while Eurostat was reluctant to accept deficit-decreasing entries in the national accounts. With regard to national fiscal rules, asset sales and securitisations were used to avoid too obvious conflicts. Following the significant decrease in budget deficits experienced since the end of 2005, current European and national fiscal rules are now respected without circumventions. However, a planned tightening of national borrowing limits as well as the European aim to have a structurally balanced budgetary position might lead to a search for new sidestepping measures. Public-private partnerships – despite possible cost advantages – seem to be a part of such efforts. At the local government level, outsourcing seems to distort budgetary data, but the net effect on deficits should be negligible.