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Federalism, Budget Deficits and Public Debt: On the Reform of Germany's Fiscal Constitution

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  • Feld Lars P.

    (University of Freiburg)

  • Baskaran Thushyanthan

    (University of Gothenburg)

Abstract

In 2009, new debt restrictions in the Grundgesetz (the German constitution) and in federal legislation passed both chambers of the German parliament by two-thirds majorities, imposing a more rigid debt regime on federal and Länder (states') fiscal policies than previous constitutional provisions entailed. In this paper, the new provisions are evaluated against the background of the problems of German fiscal federalism that they are supposed to solve, as well as the possible solutions discussed in constitutional economics. We thereby mainly draw on recent evidence from Switzerland. This reform is an important step to remedy the shortcomings of German fiscal federalism, but we argue that it needs to be complemented by tax autonomy for the German Länder.

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  • Feld Lars P. & Baskaran Thushyanthan, 2010. "Federalism, Budget Deficits and Public Debt: On the Reform of Germany's Fiscal Constitution," Review of Law & Economics, De Gruyter, vol. 6(3), pages 365-393, December.
  • Handle: RePEc:bpj:rlecon:v:6:y:2010:i:3:n:4
    DOI: 10.2202/1555-5879.1537
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    Cited by:

    1. Zareh Asatryan & Lars Feld & Benny Geys, 2015. "Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries," Public Choice, Springer, vol. 163(3), pages 307-320, June.
    2. João Sousa Andrade & Adelaide Duarte, 2011. "The Fundamentals of the Portuguese Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 195-218, June.
    3. Jairo Andrés Castaño Peña, 2020. "Las cláusulas de disciplina fiscal en las constituciones del Estado social de derecho : la sostenibilidad fiscal en Colombia y el principio de estabilidad presupuestaria en España," Books, Universidad Externado de Colombia, Facultad de Derecho, number 1186.
    4. Bury, Yannick & Feld, Lars P., 2020. "Fiscal federalism in Germany," Freiburg Discussion Papers on Constitutional Economics 20/4, Walter Eucken Institut e.V..
    5. Burret Heiko T. & Köhler Ekkehard A. & Feld Lars P., 2013. "Sustainability of Public Debt in Germany – Historical Considerations and Time Series Evidence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(3), pages 291-335, June.
    6. Boukari, Mamadou & Veiga, Francisco José, 2018. "Disentangling political and institutional determinants of budget forecast errors: A comparative approach," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1030-1045.
    7. Carolyn‐Dung Thi Thanh Tran & Brian Dollery, 2021. "All in the Mind: Citizen Satisfaction and Financial Performance in the Victorian Local Government System," Australian Accounting Review, CPA Australia, vol. 31(1), pages 51-64, March.
    8. João Sousa Andrade & António Portugal Duarte, 2011. "The Portuguese Public Finances and the Spanish Horse," GEMF Working Papers 2011-21, GEMF, Faculty of Economics, University of Coimbra.
    9. João Sousa Andrade & António Portugal Duarte, 2014. "Output-gaps in the PIIGS Economies: An Ingredient of a Greek Tragedy," GEMF Working Papers 2014-06, GEMF, Faculty of Economics, University of Coimbra.
    10. João Sousa Andrade & António Portugal Duarte, 2012. "The Importance of a Good Indicator for Global Exciess Demand," Book Chapters, in: Paulino Teixeira & António Portugal Duarte & Srdjan Redzepagic & Dejan Eric (ed.), European Integration Process in Western Balkan Countries, edition 1, volume 1, chapter 1, pages 11-35, Institute of Economic Sciences.
    11. Heiko T. Burret & Lars P. Feld, 2013. "Fiscal Institutions in Germany," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(II), pages 249-290, June.
    12. Kirchgässner, Gebhard, 2011. "Konkordanz, Divided Government, und die Möglichkeit von Reformen," Economics Working Paper Series 1125, University of St. Gallen, School of Economics and Political Science.
    13. Gebhard Kirchgässner, 2017. "The debt brake of the German states: a faulty design?," Constitutional Political Economy, Springer, vol. 28(3), pages 257-269, September.
    14. Karsten Mause & Friedrich Groeteke, 2012. "New constitutional “debt brakes” for Euroland? A question of institutional complementarity," Constitutional Political Economy, Springer, vol. 23(4), pages 279-301, December.
    15. João Sousa Andrade & António Portugal Duarte, 2014. "Output-gaps in the PIIGS Economies: An Ingredient of a Greek Tragedy," GEMF Working Papers 2014-06, GEMF, Faculty of Economics, University of Coimbra.

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