Debt brakes for Euroland

- "The economic crisis has weighed heavily on the budgets of euro-area countries. In the coming years new ways will have to be found to cut deficits and boost growth in order to achieve a long-term reduction in public debt."
- "Good budgeting rules manage the expectations of economic agents, ensure that fiscal policy outcomes are sustainable over the long term and thereby prove to be convincing measures for investors in the capital markets. There is a great deal of room for improvement for the Stability and Growth Pact (SGP) especially with regard to the fiscal policy outcomes and how they are perceived by the capital markets."
- "Euro-area countries have a wide range of national budget rules. Successful consolidation has been achieved in countries that posted high growth rates and whose deficits were cut by expenditure rules."
- "Germany’s debt brake is an intelligent and promising concept for achieving a long-term reduction in public debt. Its fiscal policy control mechanism addresses both the structural and the cyclical deficit components. Its fiscal targets are dynamic and are calculated on the basis of criteria laid down in the SGP. The debt brake could therefore easily be extended to other countries."
- "The debt brake represents Germany’s first step towards growth-oriented consolidation. Since Germany is seen as a benchmark by the capital markets, other euro-area countries could soon decide to take similar steps. The preventive arm of the stability pact would then be extended to the ―domain‖ of national policy."
- "The introduction of national debt brakes in the eurozone is technically straightforward, but politically complicated. Legally possible, but politically unrealistic is obligatory transposition in all euro-area states with a debt ratio exceeding 60% of GDP."
- "The outcome-oriented coordination of national fiscal policies via national debt brakes is effective and therefore desirable. With the medium-term objectives of the stability pact operating as fiscal guidelines they provide the eurozone countries with the commensurate scope to meet their budget goals using their own economic policy strategies."
DeutscheBank EU Monitor 20100712

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