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Future Fiscal and Debt Policies: Germany in the Context of the European Monetary Union

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Fiscal and Debt Policies for the Future

Part of the book series: International Papers in Political Economy Series ((IPPE))

Abstract

Abstract Currently fiscal policies in Germany seem to be in a very comfortable position. The German Debt Brake is regarded as an institutional precondition for this success and has been exported to the euro area in the guise of the Fiscal Compact. In this paper we scrutinise German fiscal policies and its new national and European institutional constraints from a macroeconomic perspective. We start by reiterating the requirements for fiscal policies of member countries in a currency union such as the euro area from a Post-Keynesian perspective and examine German fiscal policies in the period from 1999 until 2007 against this theoretical background. We then turn to German fiscal policies during the Great Recession, the German Debt Brake, the Fiscal Compact and future perspectives, and analyse the associated problems and risks. Finally, we discuss alternative scenarios which could avoid the deflationary pressures of the German Debt Brake and the Fiscal Compact on domestic demand and contribute to internally rebalancing the Euro area.

*We would like to thank Philip Arestis, Trevor Evans and Malcolm Sawyer for helpful comments, and Henriette Heinze, Christoph Paetz and Daniel Zeng for most valuable editing and research assistance. Remaining errors are, of course, ours.

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Authors and Affiliations

  1. Berlin School of Economics and Law and Institute for International Political Economy (IPE) Berlin, Germany

    Eckhard Hein & Achim Truger

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  1. Eckhard Hein
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  2. Achim Truger
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Editors and Affiliations

  1. University of Cambridge, UK

    Philip Arestis

  2. University of Leeds, UK

    Malcolm Sawyer

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© 2014 Eckhard Hein and Achim Truger

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Hein, E., Truger, A. (2014). Future Fiscal and Debt Policies: Germany in the Context of the European Monetary Union. In: Arestis, P., Sawyer, M. (eds) Fiscal and Debt Policies for the Future. International Papers in Political Economy Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137269539_3

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