This research project examines how the debt brake, a central instrument of German fiscal policy, influences budget management and political priorities across the 16 federal states. In a collaboration between htw saar (Prof. Dr. Felix Hörisch) and TU Munich (Prof. Dr. Stefan Wurster), quantitative analyses are conducted to shed light on the long-term consequences of this regulation.

Project Objective:

Introduced in 2009, the debt brake sets clear limits on borrowing and requires strict budgetary discipline from the federal states. This creates distributional conflicts, as resources must be carefully balanced across key areas such as education, infrastructure, and the environment. The project investigates these “trade-offs” and analyzes how the debt brake shapes political decision-making.

Key Research Questions:

 1. What impact does the debt brake, depending on its design at the subnational level, have on budget balances and overall expenditures of the federal states?

2. What expenditure priorities did the federal states establish (a) between and (b) within different policy areas before and after the introduction of subnational fiscal rules in line with the debt brake? Do the new borrowing restrictions lead to displacement effects in the allocation of state expenditures, and how can these be explained?

Methodology:

The researchers analyze budget data from 1995 to the present using quantitative methods. The aim is to identify differences in political priorities and their long-term consequences.

Relevance:

The findings provide a solid foundation for political debates on reforming the debt brake. They highlight how sustainable budget management can be achieved without neglecting necessary investments in critical areas.