German central bank president Joachim Nagel is seeking to reform the country’s constitutional deficit rules beyond technical changes, according to Euractiv.
Nagel emphasised the need for change at a side event of the World Economic Forum’s annual meeting in Davos, according to German media.
We have to work on the overall concept of the debt brake.
Strict rules on new borrowing have become a major political point of contention over the past few years. The so-called “debt brake” limits the federal government’s structural deficit to 0.35 per cent of GDP, while completely banning structural deficits for regional governments.
Disagreements over the debt brake also caused the collapse of the former three-party government coalition last November.
The Bundesbank recently proposed a “stability-oriented reform” that would increase public investment if the overall level of public debt reached below the EU target of 60 per cent of GDP. Nagel said the reform should go beyond “just small changes.”
Meanwhile, Chancellor Olaf Scholz stated that a “moderate” reform of the debt brake could allow for additional investment of between 5 and 10 billion euros a year.
According to Eurostat, German public debt currently stands at 62 per cent, twenty points below the EU average and well below that of the other G7 countries. All of them have public debt levels above 100 per cent of their GDP.
