Objects and Procedures of Budgetary Planning and Limits to Borrowing (“Debt Brake”) in the Federal Republic of Germany

  • Hermann PünderEmail author
Part of the Ius Comparatum - Global Studies in Comparative Law book series (GSCL, volume 20)


The introduction of the constitutional “debt brake” within the German Basic Law in 2009, ended a long-standing tradition that allowed state indebtedness as long as investments were made to the equivalent amount. As this old “golden rule of financial policy” had been misused for decades, a strong majority both in the Bundestag (the Parliament) and in the Bundesrat (the second chamber) voted in favor of a provision according to which “the budgets of the Federation and the Länder shall in principle be balanced without revenue from credits”. The analysis begins by clarifying that the Federation, the individual Länder and also the municipalities enjoy constitutionally guaranteed budgetary autonomy. Next, an overview of the objects and procedures of budgetary planning follows, which includes an explanation of the formal requirements for incurring debt. After that, the author analyzes in detail the limits to borrowing. There are three exceptions to the principle that indebtedness is prohibited. First, the Federation – unlike the States – is afforded a “structural” indebtedness when revenue obtained from borrowing does not exceed 0.35 % of the nominal GDP. Second, under “abnormal” economic conditions, both the Federation and the Länder may finance fiscal stimulus through the financial market (but have to reduce indebtedness or create surpluses in cyclical upturns). Third, the Basic Law permits the Federation and the States to borrow in case of “natural catastrophes” and “other unusual emergency situations”. These rules do not apply to the municipalities. Separate law restricts their borrowing. Finally, the author discusses the shortcomings of the new “debt brakes” and the risk that the restrictive regulations will be circumvented in practice.


Supra Note Federal Level Legal Personality Budget Plan Social Insurance Institution 
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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Chair of Public Law, Sciences of Public Administration, and Comparative LawBucerius Law SchoolHamburgGermany

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