Financial Policy

For decades the public budgets in Germany have been out of kilter. National, state and local governments and the social insurance institutions spend well over half of their funds on welfare. After deductions for interest payments the state is left with a mere third of its revenues for schools and universities, public administration, the armed services, police, the justice system, roads and bridges.

In recent years the public sector has had to borrow more and more so that now the nation is hobbled by a mountain of debt amounting to more than € 1.7 trillion. Too often have governments tried to revive a flagging economy with debt-financed spending programmes, yet failed to repay their accumulated borrowing in better times. Politicians have a tendency, particularly in the run-up to elections, to increase their chances of re-election by granting additional subsidies. Yet the debts of today are the taxes of tomorrow. There is a great danger that a growing tax burden will weaken the whole economy.