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Will the German Debt Brake Succeed? Survey Evidence from State Politicians

Author

Listed:
  • Streif, Frank
  • Heinemann, Friedrich
  • Janeba, Eckhard
  • Schröder, Christoph

Abstract

The present paper analyzes expectations of German politicians about the German debt brake (Schuldenbremse), which became part of the German constitution in 2009. This fiscal rule requires the federal government and the German states to run a (cyclically adjusted) budget deficit of no more than 0.35% of GDP starting in 2016 and zero % starting in 2020, respectively. We use unique survey data from more than 630 politicians at the state level to systematically study the subjective beliefs in the compli-ance and desirability of the debt brake. We find that i) state politicians who belong to the coalition parties of the current federal government coalition believe more strongly in federal government compliance, ii) state politicians who belong to the party of the current state government believe more strongly in the own state s compliance, iii) worse state fiscal conditions and stronger beliefs in lack of credible enforcement of the debt brake lower the perceived likelihood of compliance, iv) there often is a large discrepancy in the assessed probability of compliance between politicians from the own state vs. politicians from other states, v) beliefs into the consequences of non-compliance with the debt brake are quite heterogeneous, and vi) politicians often find the debt brake more desirable than probable.

Suggested Citation

  • Streif, Frank & Heinemann, Friedrich & Janeba, Eckhard & Schröder, Christoph, 2013. "Will the German Debt Brake Succeed? Survey Evidence from State Politicians," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80044, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:80044
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    References listed on IDEAS

    as
    1. Buchanan, James M., 1994. "Lagged implementation as an element in constitutional strategy," European Journal of Political Economy, Elsevier, vol. 10(1), pages 11-26, May.
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    4. Marco Battaglini, 2009. "On the Case for a Balanced Budget Amendment to the U.S. Constitution," 2009 Meeting Papers 131, Society for Economic Dynamics.
    5. Heinemann Friedrich & Janeba Eckhard, 2011. "Viewing Tax Policy Through Party-Colored Glasses: What German Politicians Believe," German Economic Review, De Gruyter, vol. 12(3), pages 286-311, August.
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    8. repec:mpr:mprres:4937 is not listed on IDEAS
    9. Friedrich Heinemann, 2010. "Eine Gabe an St. Nimmerlein?– Zur zeitlichen Dimension der Schuldenbremse," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(3), pages 246-259, August.
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    Cited by:

    1. Virkola, Tuomo, 2014. "Fiscal Federalism in Four Federal Countries," ETLA Reports 38, The Research Institute of the Finnish Economy.
    2. Yeter, Mustafa & Heinemann, Friedrich, 2014. "The effects of fiscal rules on public finances and their identification," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100425, Verein für Socialpolitik / German Economic Association.

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    More about this item

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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