Why does Germany want to reduce debt brake

The German parliament is scheduled to vote on Tuesday On a plan to alleviate government borrowing limits In order to significantly spend it on defense and infrastructure, in an attempt to compensate the American axis away from Europe and raise the country from years of economic recession.

If the procedure ultimately becomes legally, it will radically direct Germany’s relationship with government debt – and its authors hope that Germany will allow a more powerful leadership role in a critical moment for Europe.

The plan of the plan is a batch led by Friedrich Mirz, the next possible advisor, to relax on what is called colloquially as “debt brakes”, which is the maximum government borrowing that Germany has devoted to its constitution.

These brakes reduced German debt, but also prevented the government from investing in roads, programs, bridges, cabinets and other areas. Legislators say spending is now urgently required to tackle the low German competitiveness and reduce American security guarantees.

Below is a quick evidence for debt brake, how Mr. Mirz and his allies want to change it, and the challenges they will face.

What is the debt brakes?

Love Most of the wealthy countriesGermany borrows money to help achieve a balance between its annual federal budget. But unlike some of their peers, especially the United States, Germany has a constitution that limits its annual borrowing to only 0.35 percent of the country’s gross domestic product. There are exceptions to economic shrinkage and natural disasters.

In recent years, German legislators have voted to circumvent the border with some special pots of money, including spending on the epidemic in emergency situations starting in 2020 and sleeping in recent military spending. But to a large extent, the debt brakes may restrict borrow.

In 2009, when the debt brakes were offered, Germany, the United States and Britain were Almost similar levels of debt As a share of their economies. Since then, this session has risen in Britain and America, but it has fallen in Germany.

Why Germany has?

The debt brake was Added to the German constitution After the country’s budget deficit has grown during the 2008 financial crisis. It became Economic policy signature And the point of national pride.

But the country’s aversion to the deficit and the great religion precedes the crisis. Its leaders borrowed severely to help with a comprehensive collection between West and East Germany in the early 1990s, with mixed economic effects. More well -known, high government debts Help In the Weimar government in the twenties of the twentieth century, which helps to rise up Hitler.

This historical shock has been nervous pain that identified the public and political debate on government debts in Germany for generations.

Why change it now?

The debt brakes did not disturb borrowing. Its critics say it has also commissioned the German ability to stimulate its economy, invest in its future and lead in European security affairs.

German spending has been well behind its needs to upgrade its transportation networks, numbering its public services and making a group of other investments necessary for its global competitiveness.

Marcel Fratsher, head of the German Institute for Economic Research, said that the net public investment in the country has been negative over the past 25 years, as it hinders economic growth.

The brakes were also a major reason for the German legislators who only spend relatively on their army for decades, in light of the belief that the United States will continue to protect their country as it was since the end of World War II.

Now, the launch of the debt brake is urgent as the German economy continues to reduce and President Trump threatens to expand the scope of security or remove the security role of America in Europe.

Mr. Fratzer said: “Now or does not increase the increase in great spending,” said Mr. Fratzer.

Even officials of the central bank in Germany, Bundasan BankHe called for changes to debt brakes to free money for government investment to advance growth.

“The post -war history in Germany was rarely the government investment as is the case today – and the potential returns are rarely reunited very promising,” economists at the Deutsche Institute of Bank Research last week. “Germany has successfully used good years of the past decade to create financial flexibility in the most challenging times.

After resisting invitations to debt reducing changes during the last election campaign, Mr. Mirz, the right -wing Christian Democrats, says the brakes have changed a lot. The same applies to many legislators on the left.

“The reform of debt brakes is of central importance in light of the light change that the United States is no longer a reliable ally of Germany,” Anton Hofrter, a member of Parliament in the Green Party, said in a text message this week.

He said, “It is now possible to finance satellites, intelligence services, electronic defense and Ukraine’s support, as well as upgrade the required Bundesohir urgently” – the German army.

What are the changes that lawmakers think?

The agreement concluded by Mr. Mirz with Greens will create socialist Democrats on the left, the exemption of debt brakes for all spending on defense above 1 percent of GDP. “Defense” will be widely defined, to include local intelligence, assistance for allies and other measures as well as weapons purchases. An effectively, Germany in Germany can borrow no matter how much there are sums permitted by the government bond market to fund these elements.

Mr. Mirz also agreed to create a new infrastructure fund of 500 billion euros – approximately $ 550 billion – over 12 years, outside the borders of the debt brake. From this, 100 billion euros will be allocated to projects to combat climate change.

What opportunities do they succeed?

Good, but the obstacles remain.

After he decided to change the constitution to allow additional borrowing, Mr. Mirz took the extraordinary step of passing the procedure in the last days of the Eagle Parliament, before he could become a consultant.

On Tuesday, with the help of Greens and Social Democrats, Mr. Mirz hopes to obtain two -thirds of Parliament’s vote to change the constitution. The margins are slim, and it will depend on some legislators who will leave his position after this week.

If the vote succeeds, the change will continue to be approved by the Federal Council of the states on Friday before it can enter into force. This, too, can be very close.

However, the plan is facing legal challenges, including the alternative to the extreme right -wing party of Germany. The courts have refused to suspend the vote so far.

Legislators of the three large parties that support the package say they are confident that they will prevail.

“We should not let this opportunity go through us – it is a great opportunity for our country and also a real change in politics,” said Mr. Mirz on Sunday.