Germany's debt-brake drama
Posted: November 28th, 2023, 6:34 am
The Telegraph articles written by Ambrose Evans-Pritchard are often interesting even if they are also a little too doom-laden with retrospect, but he wrote a piece last week on Germany's constitutional debt-brake that looks to be making it's way into wider media-outlets this morning, as the huge financial issues now look to be working their way through their political system -
Germany’s debt-brake drama is poison for Deutschland Inc and for Europe’s monetary union -
Economists have long warned that Germany’s constitutional debt-brake is a timebomb on a long fuse. That bomb has now detonated at the most critical moment in German economic history since the launch of the Wirtschaftswunder in 1949.
The Scholz government must plug a fiscal hole of €128bn to comply with a ruling by the top court, either by slashing spending, or by raising taxes or by bleeding investment in the rising technologies of the next half century.
Analysts at Citigroup estimate that €87bn of this must be covered over the next 13 months.
https://archive.is/MHjl9
The Times are this morning running with this story too, now that some of the above issues raised by Ambrose are coming to a head -
Fiscal crisis for Scholz after court ruling forces budget cuts -
Germany has been forced to patch together an emergency budget and declare a renewed fiscal “crisis” after a court ruling torpedoed the government’s spending plans.
The judges’ verdict has torn a €60 billion hole in the public finances, larger than the country’s annual defence expenditure, and left a shortfall of €18 billion for the 12 months ahead.
This has in turn led to political pandemonium as the three parties under Olaf Scholz, the chancellor, openly scrap with one another over where the cuts should fall and how deep they should be.
The conflicts stretch from €12.5 billion of investment in the creaking railway system to tens of billions in energy price relief for households and businesses.
The court judgment has also shaken some of the central pillars of Germany’s modern economic policy, including the state’s legal duty to keep public borrowing to a negligible minimum.
https://archive.is/gKWPr
This issue looks to have come to a point at completely the wrong time in a financial sense for Germany, given it's current post-COVID economic woes, and also at completely the wrong time in a political sense, given the growing rise of right-facing parties within their political system, as also now being seen elsewhere in Europe of course, and who will no doubt use any news like this to further their demands for change.
Cheers,
Itsallaguess
The Telegraph articles written by Ambrose Evans-Pritchard are often interesting even if they are also a little too doom-laden with retrospect, but he wrote a piece last week on Germany's constitutional debt-brake that looks to be making it's way into wider media-outlets this morning, as the huge financial issues now look to be working their way through their political system -
Germany’s debt-brake drama is poison for Deutschland Inc and for Europe’s monetary union -
Economists have long warned that Germany’s constitutional debt-brake is a timebomb on a long fuse. That bomb has now detonated at the most critical moment in German economic history since the launch of the Wirtschaftswunder in 1949.
The Scholz government must plug a fiscal hole of €128bn to comply with a ruling by the top court, either by slashing spending, or by raising taxes or by bleeding investment in the rising technologies of the next half century.
Analysts at Citigroup estimate that €87bn of this must be covered over the next 13 months.
https://archive.is/MHjl9
The Times are this morning running with this story too, now that some of the above issues raised by Ambrose are coming to a head -
Fiscal crisis for Scholz after court ruling forces budget cuts -
Germany has been forced to patch together an emergency budget and declare a renewed fiscal “crisis” after a court ruling torpedoed the government’s spending plans.
The judges’ verdict has torn a €60 billion hole in the public finances, larger than the country’s annual defence expenditure, and left a shortfall of €18 billion for the 12 months ahead.
This has in turn led to political pandemonium as the three parties under Olaf Scholz, the chancellor, openly scrap with one another over where the cuts should fall and how deep they should be.
The conflicts stretch from €12.5 billion of investment in the creaking railway system to tens of billions in energy price relief for households and businesses.
The court judgment has also shaken some of the central pillars of Germany’s modern economic policy, including the state’s legal duty to keep public borrowing to a negligible minimum.
https://archive.is/gKWPr
This issue looks to have come to a point at completely the wrong time in a financial sense for Germany, given it's current post-COVID economic woes, and also at completely the wrong time in a political sense, given the growing rise of right-facing parties within their political system, as also now being seen elsewhere in Europe of course, and who will no doubt use any news like this to further their demands for change.
Cheers,
Itsallaguess