The national budgets of the federal government, the states, the municipalities and the social security funds have a volume of just under half of Germany's gross domestic product. After running deficits for decades, the state as a whole recently achieved surpluses before the Corona crisis. Thanks to low interest rates and rising revenues from taxes and social security contributions, Germany did not have to incur any new debt. However, the Corona crisis has again led to rising government spending, lower tax revenues and thus higher government debt overall, although the scope for government investment is limited by the debt brake. Germany currently has a debt level of more than two trillion euros.
About the topic
In addition to the openly disclosed debt, implicit debt lies dormant in the social system in the form of unfunded benefit commitments for pension, health and long-term care insurance. Germany currently spends around one-third of its economic output on social benefits, which already puts it in the lead among industrialized nations. Demographic change will place even greater demands on the social systems in the future.
The development of income and wealth inequality is the subject of much controversial debate in Germany. Although the inequality of disposable household incomes in Germany is higher today than it was at the beginning of the 1990s, it has not changed significantly since 2005. In an international comparison, it is low. For example, the top ten percent receive just over 30 percent of incomes. The wealthiest ten percent own around 60 percent of total assets. Consequently, wealth is distributed more unequally than disposable income. However, the upper class is not quite as aloof as these figures suggest: A large proportion of wealth is tied up in businesses that provide the livelihood for many millions of people in the form of jobs.
Due to technological progress, companies are increasingly looking for more highly qualified employees - with correspondingly higher salaries. At the same time, low-skilled workers face greater competition from workers from abroad. Because of these and other trends, income distribution in Germany - as in all industrialized countries - widened in the 1990s and up to the mid-2000s. Unlike most other countries, however, Germany was recently able to slow the income drift and fix it at the 2005 level. The good economic development and the unprecedented reduction in unemployment have improved the living situation of millions of people and stabilized income levels.
The state intervenes more strongly in income distribution in Germany than in many other countries, so inequality in Germany is low. As convoluted as the effects on redistribution are in detail, the result is clear: Those who earn more receive less state pay and pay higher taxes. Conversely, the less citizens earn, the more they receive from the state. The strong shoulders thus bear a heavier burden.
Martin Beznoska / Tobias Hentze / Katja Rietzler / Martin Werding IW-Trends No. 3 24. August 2023
The Challenges to the Sustainability of Germany’s Public Finances
The German government’s fiscal responses to the Covid-19 pandemic and the Ukraine war in an attempt to cushion their impact have driven up the country’s general government debt-to-GDP ratio.
Martin Beznoska / Tobias Hentze / Katja Rietzler / Martin Werding IW
Jasmina Kirchhoff / Simon Schumacher IW-Trends No. 2 12. July 2023
The Economic Consequences of the Energy Price Crisis as Exemplified by the Pharmaceutical Industry in Germany
The halting of the Russian gas supply is threatening the attractiveness of Germany as an industrial location. Not only has the energy price crisis led to significantly increased producer prices in the industrial sector.
For the statutory pension scheme to be financed sustainably on its current pay-as-you-go basis, as many people as possible need to stay at work until the standard retirement age.
The national budgets of the federal government, the states, the municipalities and the social security funds have a volume of just under half of Germany's gross domestic product. After running deficits for decades, the state as a whole recently achieved surpluses before the Corona crisis. Thanks to low interest rates and rising revenues from taxes and social security contributions, Germany did not have to incur any new debt. However, the Corona crisis has again led to rising government spending, lower tax revenues and thus higher government debt overall, although the scope for government investment is limited by the debt brake. Germany currently has a debt level of more than two trillion euros.
The Challenges to the Sustainability of Germany’s Public Finances
Martin Beznoska / Tobias Hentze / Katja Rietzler / Martin Werding
The German government’s fiscal responses to the Covid-19 pandemic and the Ukraine war in an attempt to cushion their impact have driven up the country’s general government debt-to-GDP ratio.
Martin Beznoska / Tobias Hentze / Katja Rietzler / Martin Werding
IW
The Economic Consequences of the Energy Price Crisis as Exemplified by the Pharmaceutical Industry in Germany
Jasmina Kirchhoff / Simon Schumacher
The halting of the Russian gas supply is threatening the attractiveness of Germany as an industrial location. Not only has the energy price crisis led to significantly increased producer prices in the industrial sector.
For the statutory pension scheme to be financed sustainably on its current pay-as-you-go basis, as many people as possible need to stay at work until the standard retirement age.
How Stereotyping the Rich and the Poor Impacts Redistributive Preferences in Germany
External Publication
20. March 2023
Punching up or Punching down?:
How Stereotyping the Rich and the Poor Impacts Redistributive Preferences in Germany
Matthias Diermeier / Madeleine F. Fischer / Judith Niehues in SOEP papers
Redistribution and the welfare state have been linked by academic discourse to narratives that portray specific societal groups as ‘deserving’ or ‘undeserving’. The present analysis contributes to this scholarship in a twofold manner.
Matthias Diermeier / Madeleine F. Fischer / Judith Niehues in SOEP papers
IW
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