Zeitschrift für Wirtschaftspolitik
Ed. by Donges, Juergen B. / Krause, Michael / Roth, Steffen J. / Watrin, Christian
The paper deals with the issue in how far the fiscal policy of the German Laender can be considered as sustainable. Comparing the fiscal policy stance and the budgets of the 16 German states, only Bavaria and Saxony are pursuing a fiscal policy which may be labelled as sustainable. The other states did not succeed in their attempt to stabilize, least of all to reduce, their public debt relative to their GDP. The greatest deviation from a sustainable budget is reported for Berlin with a “non-sustainability gap” of 6.38 per cent of GDP, followed by Saxony-Anhalt (1.77 per cent of GDP). The latter holds the largest debt ratio among German non-city states. Bremen and Saarland are exceptional cases; both did not have a “non-sustainability gap” in 2001 but, at the same time, receive federal funds since 1994 which are earmarked to redeem former excessive debts.