Coordination in Budget Policy after the Second Federal Reform

This article considers the impact of the 2009 federalism reform on budget policy in national and Land governments. It assesses whether the reform led to a centralisation of budget policy, through the work of the new ‘Stability Council’ and imposition of a ‘debt brake’, which would affect both levels. The fiscal and economic crisis of 2008–09 coincided with the so-called second federalism reform prepared from 2007 to 2009. This coincidence was supported by a decision of the Federal Constitutional Court requiring an early warning system for ‘budget crises’. Against this backdrop the reform commission placed budget policy on the agenda, resulting in the establishment of a debt brake and a common framework to detect budget crises through the Stability Council. Compliance with both institutions expresses the new paradigm of balanced budgets that avoid new state debts. This article considers whether the common goal of budgetary crisis prevention results in a uniform or comparable budgetary policy in the Länder. It draws on expert interviews and finds that a common mechanism to detect a budget crisis was indeed established. However, in the end a large amount of variation in budget policy can be seen between the Länder, so that budgetary policy (still) is a long way off uniformity. \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Full Article \n  Figures & data \n  Citations \n \n Metrics \n  Reprints & Permissions \n  PDF \n \n \n \n \n \n \n \n \nAbstract \n \n \nThis article considers the impact of the 2009 federalism reform on budget policy in national and Land governments. It assesses whether the reform led to a centralisation of budget policy, through the work of the new ‘Stability Council’ and imposition of a ‘debt brake’, which would affect both levels. The fiscal and economic crisis of 2008–09 coincided with the so-called second federalism reform prepared from 2007 to 2009. This coincidence was supported by a decision of the Federal Constitutional Court requiring an early warning system for ‘budget crises’. Against this backdrop the reform commission placed budget policy on the agenda, resulting in the establishment of a debt brake and a common framework to detect budget crises through the Stability Council. Compliance with both institutions expresses the new paradigm of balanced budgets that avoid new state debts. This article considers whether the common goal of budgetary crisis prevention results in a uniform or comparable budgetary policy in the Länder. It draws on expert interviews and finds that a common mechanism to detect a budget crisis was indeed established. However, in the end a large amount of variation in budget policy can be seen between the Länder, so that budgetary policy (still) is a long way off uniformity

Balanced budget · Centralisation · Debt · Decentralization · Deficit spending · Economic policy · Economics · Federal budget · Federalism · fiscal federalism · Macroeconomics · Market economy · Political science · Public economics · Law · Local Government Finance and Decentralization · Political Systems and Governance · Public Administration · Social Policy and Reform Studies · Finance