Debt Mountain Accelerates Despite Measures to Slow It Down

Sachsen-Anhalt’s Debt Mounts Despite “Debt Brake” rules

The debt mountain in Sachsen-Anhalt continues to grow, despite the implementation of a “debt brake” five years ago. This brake was intended to ensure the state manages its expenses without taking on new loans.

However, exceptions were permitted during the COVID-19 pandemic, and their effects are still being felt. Kay Barthel, President of the State Audit Office, noted the meaningful increase in debt post-debt brake implementation.

“It is true that we have never incurred more debt than in the period after the debt brake,” Barthel stated. He projects that the state’s debt could rise by nearly 5 billion euros by 2026.

“In that respect, the debt brake hardly deserves its name,” he added, questioning the effectiveness of the policy in its current form.

Barthel emphasized that structural reforms within the public service are unavoidable for Sachsen-Anhalt. He also highlighted the necessity of leveraging digitalization more effectively to manage state finances and improve efficiency.

Understanding Germany’s Debt Brake

The concept of a “debt brake” (schuldenbremse) is a key feature of fiscal policy in Germany, enshrined in the Basic Constitutional Law. It aims to limit structural government deficits at both the federal and state levels.

While its core principle is to prevent excessive borrowing, its submission can be complex, especially during economic downturns or crises. Exceptions are frequently enough debated and can lead to increased debt, as seen in Sachsen-Anhalt.

The effectiveness and interpretation of such fiscal rules are ongoing discussions among policymakers and economists, notably concerning their impact on public investment and necessary structural adjustments.

Frequently Asked Questions About Sachsen-Anhalt’s Debt

what is the current situation with Sachsen-Anhalt’s debt?

Sachsen-Anhalt’s debt is increasing, even with a debt brake in place, with projections indicating a significant rise by 2026.

What is the “debt brake” in Germany?

The “debt brake” is a constitutional rule designed to limit structural government deficits and borrowing.

Why is Sachsen-Anhalt’s debt increasing despite the debt brake?

Exceptions allowed during crises, such as the COVID-19 pandemic, have contributed to the rising debt levels.

Who is Kay Barthel?

Kay Barthel is the President of the State Audit Office of Sachsen-Anhalt, commenting on the state’s financial situation.

What are the proposed solutions for Sachsen-Anhalt’s debt?

The State Audit Office suggests structural reforms in public service and increased use of digitalization.

How significant is the projected increase in debt?

The debt is expected to increase by almost 5 billion euros by 2026.

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