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.