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After the Crisis - Bringing German Public Finances Back to a Sustainable Path

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  • Isabell Koske

Abstract

Past consolidation has allowed the automatic stabilisers to operate fully during the crisis. Further fiscal easing in late 2008 and early 2009 contributed to a markedly widening fiscal deficit in 2010. A newly enacted fiscal rule, which limits the structural budget deficit of the federal government to a maximum of 0.35% of GDP and requires balanced structural budgets for the Länder, will help bring public finances back to a sustainable path. However, some elements of the new rule may need to be fine tuned in order for it to be more effective. To comply with the transition requirements of the new rule, consolidation beyond a mere phasing-out of the stimulus packages will be needed between 2011 and 2016. Priority should be given to reducing public expenditure, notably by improving public sector efficiency and by cutting back on grants and government consumption, and to phasing out distorting tax concessions. To improve the structure of the tax system, the government should consider raising the share of taxes on property and consumption in total tax revenues. This paper relates to the 2010 OECD Economic Survey of Germany. (www.oecd.org/eco/surveys/germany). Après la crise : retrouver la viabilité des finances publiques allemandes Les efforts budgetaires recents ont permis aux stabilisateurs automatiques de fonctionner pleinement au cours de la crise. Des mesures de relance entre fin 2008 et debut 2009 ont contribue a un elargissement marque du deficit public en 2010. La regle budgetaire adoptee recemment, qui limite le deficit structurel de l'administration federale a un maximum de 0.35% du PIB et exige l'equilibre des budgets structurels des Lander, aidera a retrouver la viabilite des finances publiques. Toutefois, des ajustements de certains aspects de cette nouvelle regle pourraient contribuer a la rendre plus efficace. Ses dispositions transitoires exigeront une consolidation budgetaire entre 2011 et 2016 allant au-dela de la simple elimination des mesures de relance. La priorite devrait etre accordee a la reduction des depenses publiques, notamment en ameliorant l'efficience du secteur public, en reduisant les subventions et la consommation publique, et a l'elimination des avantages fiscaux engendrant de larges distorsions. Pour ameliorer la structure du systeme fiscal, le gouvernement devrait envisager d'augmenter la part des impots sur la propriete et la consommation dans le total des recettes fiscales. Ce document se rapporte a l'Etude economique de l'OCDE de l'Allemagne, 2010 (www.oecd.org/eco/etudes/allemagne).

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 766.

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Date of creation: 12 May 2010
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Handle: RePEc:oec:ecoaaa:766-en

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Keywords: public debt; Germany; fiscal consolidation; consolidation budgétaire; dette publique; Allemagne;

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Cited by:
  1. Muraközy, László, 2010. "Válságok állama - államok válsága
    [The state in crises-the crisis of states]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 779-797.
  2. Balazs Egert, 2012. "Bringing French Public Debt Down: The Options for Fiscal Consolidation," CESifo Working Paper Series 3928, CESifo Group Munich.

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