Arbeitspapier
Fiscal policy and rebalancing in the Euro area: A critique of the German debt brake from a Post-Keynesian perspective
The German debt brake is often regarded as a great success story, and has therefore served as a role model for the Euro area and its fiscal compact. In this paper we fundamentally criticize the debt brake. We show that (1) it suffers from serious shortcomings, and its success is far from certain even from a mainstream point of view; (2) from a Post-Keynesian perspective, it completely neglects the requirements for fiscal policies of member-countries in a currency union and will prevent fiscal policy from contributing to the necessary rebalancing in the Euro area; and (3) alternative scenarios, which could avoid the deflationary pressures of the German debt brake on domestic demand and contribute to internally rebalancing the Euro area, are extremely unlikely, as they would have to rely on unrealistic shifts in the functional income distribution and/or investment and savings behavior in Germany.
- Language
-
Englisch
- Bibliographic citation
-
Series: Working Paper ; No. 776
- Classification
-
Wirtschaft
Aggregate Factor Income Distribution
Policy Objectives; Policy Designs and Consistency; Policy Coordination
Fiscal Policy
Incomes Policy; Price Policy
Studies of Particular Policy Episodes
National Deficit; Surplus
National Debt; Debt Management; Sovereign Debt
- Subject
-
Fiscal Policy
Rebalancing
Functional Income Distribution
Debt Brake
Germany
Euro Area
- Event
-
Geistige Schöpfung
- (who)
-
Hein, Eckhard
Truger, Achim
- Event
-
Veröffentlichung
- (who)
-
Levy Economics Institute of Bard College
- (where)
-
Annandale-on-Hudson, NY
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hein, Eckhard
- Truger, Achim
- Levy Economics Institute of Bard College
Time of origin
- 2013
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