Wifo boss Gabriel Felbermayr sees anchoring a debt brake in the constitution as problematic. It would be wiser if politicians would curb spending on their own initiative. He can imagine a spending ceiling, but new EU budget rules would be even better, he tells ‘Krone’.
“Excessive national debts cause more inflation,” Felbermayr warns and urges politicians to exercise more budget discipline. A debt brake anchored in the constitution entails many risks, Felbermayr points out to the current problems in Germany.
Politics runs the risk of making itself powerless. Budget policy would then not be made by the elected representatives of the people, but by the Constitutional Court.
“I think it would be better if such a brake were not necessary and politicians could use their own resources to implement more fiscal policy.” An expenditure ceiling, like those in Tyrol and Upper Austria, would be a possibility. “Costs should not grow faster than revenues.” This can be used as a guideline. “However, in my opinion, better fiscal rules at EU level would be needed and respected. At least we have a common currency,” Felbermayr said.
A heated debate is also raging in Germany
There is currently a heated debate in Germany about the budget and the debt brake. This is following a ruling by the Constitutional Court. The debt brake, enshrined in the Basic Law, was then to be suspended in 2023.
The 2024 budget is still being fought over. However, Germany has a significantly lower debt than Austria. The debt ratio will fall from 65 to 64 percent of economic output in 2024; in Austria it will remain unchanged at 76 percent of GDP until 2027.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
