Jens Bastian – Germany joins Europe’s austerity club

The government of German Chancellor Angela Merkel agreed this week on a sweeping list of spending cuts and someextra taxes to reduce Germany’s growing budget deficit. What is the significance of these austerity measures? The package of spending cuts and revenue increases addresses constitutional requirements and seeks to curtail 10 billion euros a year from the federal budget from 2011 until 2016.

The major issue on the coalition government’s agenda concerned how and where to make substantial spending cuts and identify revenue increases in order to reduce the growing budget deficit in Germany. The need for this action is determined by the so-called “public debt brake” (Schuldenbremse). This legal requirement forms part of the German constitution and was adopted by the parliament in 2009. According to this provision, by 2016 – and adjusted for cyclical effects – the federal government is only permitted to have a national debt ratio that corresponds to 0.35 percent of annual gross domestic product.

Read the entire article in ATHENS PLUS / page 9