Interest expense in 2010 of the Federal make up around 12 percent of total expenditure. According to the social spending, this is the second largest item on the expenditure side of the federal. High government debt in Germany for years restricts the ability of the state massively. Reason is the dramatically growing interest burden. This year, the federal budget to fall to 37 billion euros.
That is almost 12 percent of total federal expenditure. Of course, this has nothing to do with sustainable fiscal policy that also takes into account the future generations. The federal budget for 2011 now has a U-turn be initiated if the debt limit of the Constitution is to be met by 2016. Nevertheless, how?
One way would be higher inflation, then the state could deleverage at the expense of citizens. Social market economy presupposes property and liability. Inflation, however, is the expropriation of the owners of financial assets and a violation of the principle of liability and responsibility. Alternatively, the government could try to reduce the debt on higher revenues. Nevertheless, even this will not succeed. Because tax increases slow, down growth and thus reinforce the budget problems in addition.
That leaves only the strategy of public spending consistently to cut red tape. Empirical studies show that lower public spending do not impede economic growth. The policy has to decide where they want to save concrete. These priorities need to be established on trade. Should cut the state where political objectives today are no longer urgent, for example, regional policy, development policy, energy and agricultural policy. Subsidies need to be reduced and public goods provided efficiently in the future. Many state benefits can be transferred to the private sector. Also in the social budget, savings are possible.
Investment in education could be made without departing from the consolidation course. On the first education summit two years ago in Dresden politics had promised to increase spending on education and research by 2015 to 10 percent of GDP. Currently they are at 8.6 percent. Admittedly, due to the crisis, the budget situation is currently very fragile. Nevertheless, there are numerous ways to finance for important projects.
The time window for this is good because demographic factors in the federal budget are funds available. Go back to 2015 spending on child benefit is about 1.7 billion euros. The declining numbers of pupils in general education schools and vocational release is around 4.3 billion euros. Finally, the introduction of comprehensive tuition fees of 500 Euro per semester would result in additional revenues of € 1. So, about 7 billion euros, which would be available for spending on education, without it to straining the budget.
The majority positive vote of the Bundestag’s 750-billion-euro rescue package should not obscure the fact that in the discussion, even extreme positions could be heard. In plain language, this is the requirement for task of monetary union. It is the underlying judgment but it is so well founded. After all, the union has worked ten years well. This is despite all the compromises in the accession decisions and the application of the Stability and Growth Pact in the last decade. Germany in particular has benefited in recent years from monetary stability within the euro zone.
That does not justify a rescue at any price. All attempts at a solution have to be weighed carefully. The 750-billion-euro bailout with its strict conditions, provide to every request for help to the International Monetary Fund and its requirement acts. Even if in this rescue, there are elements that contribute to wrong economic incentives. Their rejecting would have been fatal. The price of failure of the monetary union would be incalculable.
After the debt crisis
The national debt of federal, state, and social security funds in Germany is rising steadily. It is high time to be demonstrate firmly stepping on the debt ceiling. European governments are under intense pressure. It is not only their debt, but also the fear of ever-higher refinancing costs, which they push to massive austerity.
Some politicians are the cause of this crisis of ominous “speculation monsters” or “rivets in pinstripes”. It is true, however that the market puts a finger only into the gaping wound. Root of all evil is the debt of the states themselves. After the debt crisis of the state is a long-term, which has been exacerbated by the financial crisis in 2008 still further. For decades, there was a failure to stem the endless growing debt. In 2007, as and before the financial crisis, the debt of the public sector has grown at an incredible 1,578 billion (approximately EUR 19,000 per capita) in interest payments alone, devouring 67 billion euros, which are nearly three percent of GDP.
The consequences are enormous. Sure, with the introduction of the new German debt brake requires the Constitution to save the policy. Only one of the euro crisis and the ignoring of the Stability and Growth Pact clearly shows that a brake can take effect only when you step on it too!
The youth unemployment in countries with dual training in the OECD comparison is very low. Depreciation of the euro, bankruptcy, inflation all these are horror scenarios currently, which dominate the public debate. The economic facts and yet they unfortunately often on the track.
The gloomy mood of the public contrasts the situation of the companies. For this, the future look much less sceptical. The unemployment rate and in May was at its lowest level in 14 years, and in the labour market, there are a lot more vacancies. For a reason, the innovation and internationality of the German company remains strong and is paying off, especially now. Nevertheless, success lies deeper.
Therefore, for the safety of the innovation the importance of tertiary education is emphasized, and indeed quite justified. The dual vocational training with their differentiated approaches to the world of work is a major explanation for the success of our industry. The success of the model reflects the very low youth unemployment among OECD countries declined only in Germany.
To counteract the lack of skilled workers, we have to play this level. For example, through hands-on training and a closer alignment of study and practice. In this way, will be facilitated the integration of problem groups in the labour market. We have just grounds for optimism as to doubt! Whether the end is approaching evil, remains our cause.
The sustainability gap
The sustainability gap of care is about 37 percent of GDP. The debt explodes in Germany this year is expected to reach about 75 percent of annual economic output. Nevertheless, this is just the tip of the iceberg. 01.01.1995 for Germany has been the long-term care as insurance and it is a time bomb. Even then, it was clear that the social contract is not up in the care.
That is the problem with all the predictions. We can make allowance for only what you know and do not take into account what you cannot know. Still I think it is better for the little that we know to be considered for predictions, rather than simply at random. Do you actually have a life insurance (endowment)? If so, why actually, but where you cannot be sure that paid in 2030, is what they have paid, plus interest?