Germany's balanced budget amendment, commonly referred to as the debt brake, is a crucial fiscal rule that was implemented in 2009. This amendment serves to limit the government's annual deficit to 0.35% of GDP while also imposing restrictions on borrowing.
The debt brake was introduced in response to Germany's debt-to-GDP ratio surpassing 60%, a threshold established by the Maastricht Treaty. A significant factor contributing to this high ratio was the substantial spending associated with the reunification of Germany.
The debt brake has sparked considerable debate among economists and policymakers. Proponents argue that it is essential for maintaining fiscal discipline and ensuring long-term economic stability. Critics, however, contend that it restricts public investment, particularly during times of economic downturn, when such investments could spur growth and recovery.
In March 2025, Germany made significant changes to the debt brake by amending its constitution. This amendment allows for specific exceptions, including:
On March 18, 2025, the Bundestag voted in favor of the amendment, resulting in a 512-206 decision. The amendment then proceeded to the Bundesrat, where it required a two-thirds majority to pass.
These recent changes reflect Germany's ongoing balancing act between maintaining fiscal discipline and addressing critical national needs such as defense and infrastructure. As the country navigates these challenges, the implications of the balanced budget amendment will continue to be a topic of significant interest and discussion.
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