In the shadow of the never-ending Corona pandemic, large sections of the population and politicians nationally and internationally have become state optimists, as this appears to be, by and large, without alternative. According to the federal government's plans, the debt will explode from zero to 452.2 billion euros between 2020 and 2022. Euro. This is almost half the national debt accumulated by the federal government in the previous 70 years. More new loans are taken out within these three households than in the previous 20 years.
The slump in tax revenues is also reaching historic dimensions. The tax coverage ratio in the 2020 to 2022 budgets falls below even the low coverage ratios of the 2009 and 2010 "crisis budgets" in the wake of the global financial and economic crisis at the time. After the 1. Supplemental 2021 budget, the federal government will only be able to cover just under 52% of its spending with expected tax revenues in the current year. Tax coverage rates in the recent past in the 95% range (2015 to 2019 federal budgets) will not be approached by the federal government for the foreseeable future. From today's perspective, it seems at least doubtful whether the reduction in new debt projected in the key figures for budgets from 2023 onwards is realistic.
Now, one may initially object that extraordinary times call for extraordinary measures. A slightly closer look at things, however, raises doubts. As a result, the 2020 federal budget was already significantly overdimensioned, as the 2. Supplementary 2020 estimated net borrowing of 217.8 billion. 87.3 billion in actual terms. euros was undercut by. which was undercut by 61.8 billion. euros compared with the 1. The increase in net borrowing authorization would not have been necessary with this amendment. The Federal Accounting Office's guidance to plan realistically while adhering to key budgetary principles such as truth (in the sense of accuracy of estimates), clarity, and budget maturity was apparently not heeded here.
Furthermore, the question is why already in March of this year in the 1. The 2021 supplement would have increased the permitted net borrowing by more than. euros was made (from approx. 180 billion. to approx. 240 billion. euros) when unused sog. Residual credit authorizations (§ 18 para. 3 BHO) of over 80 billion. € were available which could have been mobilized without a new supplementary budget. There is therefore a reasonable presumption that the emergency and the net borrowing made possible by it are being used as a justification for implementing, accelerating or otherwise promoting political programs that were already part of the government's political agenda before the emergency began but were prevented by the debt brake that still had to be complied with at the time. Admittedly, the principle of total coverage ("all revenues cover all expenditures") favors obscuring causal relationships in a budget by claiming that the particular spending measure is not emergency loan-financed. However, for all the budget lawmakers' latitude in assessing need, they have a duty of publicity, widely recognized by German constitutional courts, regarding the suitability of their actions to overcome need.
Particularly dangerous for constitutional violations are reserves that the state builds up in times when it is permitted to incur high net new debt – in principle – in order to be able to use the funds "saved" in this way in later budget years.
As sensible as moderate reserves may be in the ideal case of a debt-free budget, their formation or increase proves problematic in a budget that is (partly) debt-financed. On the one hand, the question is whether the state is allowed to put budget funds into reserves ("credit balances"), although it could pay off old loans.
Budgetary arrangements – especially in the form of reserves – are also unlikely to result in the borrowing needs of certain financial years being spread over other financial years. This split would have the effect of undermining the credit cap, which is based on the individual financial year. The Constitutional Courts of North Rhine-Westphalia and Rhineland-Palatinate have therefore confirmed that, in the case of credit financing of a budget, in principle neither allocations to a general reserve shown in the state budget nor to special reserves, if any, are permitted. Reserves that are legally independent as special assets can be justified.
In contradiction, because of the 2. In the 2020 supplementary budget, the Energy and Climate Fund, as a special fund without legal capacity, was granted a debt-financed subsidy of approx. 26.2 bn. Euro granted. However, the "lion's share" of the subsidy will be used to fund long-term care only in future years. Under the rules of the debt brake, however, the "active modernization push" ("Wumms") so described by the coalition factions may not be financed by emergency borrowing. In the opinion of the Federal Court of Audit, such action by the budget legislator also conflicts with the principles of annuality, maturity and budget truthfulness. Since a not inconsiderable portion of the investment funds now "put on display" will remain there for the time being, not even the economic effect hoped for in 2020/2021 to combat the economic consequences of Corona will occur. Identical arguments can be used against the allocations by the 2. 2020 supplemental budget into other special funds such as "Digital Infrastructure" (1 billion. euros), "childcare expansion" (0.5 billion. euros), "all-day school expansion" (1.5 billion. euros) as well as additional capital expenditures for administration and the military (3 billion. Euro) can be objected. All these capital expenditures are obviously based on general tasks of the federal government, which arise completely independently of the "Corona crisis" and pre-burden future budgets.
Conversely, but unfortunately equally open to criticism, the federal government behaves in a manner that involves the use of previously established reserves. Indeed, the additional net borrowing (NKA) is also so high because the federal government is using the "asylum reserve" of 48.2 billion euros saved from surpluses in the 2015 to 2019 budgets. Euro for the fiscal years 2023 and 2024 "in stock" would like to keep. Since the uncertainty regarding the level of financial challenges of refugee integration that existed when it was introduced no longer exists, it should have already been fully resolved by the 2020 supplementary budget to avoid the increased NCA through the budgetary resources it contains. In fact, this was a complete credit financing of the measures to overcome the crisis.
At the same time, the imbalance in the federal budget between the social budget, which currently already has a share of 51.6% with a further upward trend, and investments, which will also account for less than a quarter of social spending in the next budgets, is worsening. Many of the structural problems predate the pandemic.
Although the debt-to-GDP ratio in 2020 was 71.2% of nominal gross domestic product (GDP – preliminary result), below the 2010 level (82.3% of GDP), pandemic-related losses are growing by the week.
Even apart from this dynamic, this figure is no real comfort because the federal budget is unlikely to see relief similar to that seen in the years following the financial crisis: unlike then, neither interest rates nor commodity prices will continue to fall. The continued growth in tax revenues up to 2019 is also unlikely to be repeated on this scale. At best, the demographic pressure on the social security system will grow.
Whichever coalition government is in power, there will be no way around the perennial political issues, in particular stringent prioritization, task review and subsidy reduction. Otherwise, the debt brake would be virtually impossible to maintain. But softening or even abolishing it would also be fatal with regard to its exemplary function, because it equally stabilizes the continued existence of the euro area.