Growth of debt mountain persists despite quicker fiscal brakes, according to Court of Auditors reports - Fiscal Debt Expansion Outpaces Control Measures, According to Court Auditors' Report
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In Saxony-Anhalt, the implementation of the debt brake, designed to limit borrowing and ensure fiscal discipline, has been met with challenges as the state's debt continues to grow. By the end of 2026, Saxony-Anhalt is expected to have around 25 billion euros in debt, a figure that has increased despite the debt brake's introduction in 2020.
The strict application of the debt brake during the COVID-19 pandemic has limited financial flexibility, creating tensions in state finances. The Audit Office has highlighted the difficulty states faced in complying with budgetary restrictions while needing to finance urgent pandemic response measures. This limitation contributed to the growing debt in Saxony-Anhalt.
The Audit Office has also identified significant issues with the use and effectiveness of COVID-19 contact tracing apps deployed during the pandemic. Problems included concerns about data privacy, technical usability, and overall impact on controlling virus spread. These issues reduced the apps' efficiency, complicating efforts to manage the public health crisis effectively.
In the realm of digitalization, the Audit Office emphasizes the need for more effective utilization in Saxony-Anhalt to help address the growing debt. The state sports school in Osterburg, for instance, received subsidies of around 2.3 million euros in 2022, but has an occupancy rate of around 50%. The auditors have called for a different pricing structure for the state sports school, as revenues are far below the actual costs.
Collective bargaining agreements and higher social spending are also contributing to the widening gap between revenues and expenditures. The Audit Office has emphasized the need for faster planning and less bureaucracy to address underachievements in spending.
Contrary to some claims, the Audit Office President, Kay Barthel, has rejected the notion that the debt brake is an investment barrier. The debt brake allows for the possibility of taking on new debt in times of crisis, but it is vulnerable to abuse, allowing for the possibility of taking on more debt beyond crises.
In conclusion, Saxony-Anhalt's financial situation under the debt brake is stressed by growing debt parallel to rigid fiscal rules, and the pandemic has highlighted critical weaknesses in both fiscal policy flexibility and digital public health tools, as flagged by the Audit Office. To address these challenges, structural reforms in the public sector and savings are unavoidable, and digitalization must be utilized more effectively.
[2] References: State Audit Office of Saxony-Anhalt (2022). Annual Report 2021. Retrieved from https://www.sachsen-anhalt.de/fileadmin/user_upload/audit/jahresberichte/2021/Jahresbericht_2021_web.pdf
- The state of Saxony-Anhalt is grappling with the implementation of the debt brake, as their employment policy, business finances, and political decisions, particularly during the pandemic, have had an impact on its effectiveness.
- The Audit Office suggests that focusing on more effective utilization of digitalization in areas such as COVID-19 contact tracing apps, public sector digitalization, and state-funded institutions like the sports school in Osterburg could help alleviate the growing debt, but it emphasizes the need for structural reforms in the public sector and savings as well.
