Growing debt mount amidst debt control measures, according to the Audit Office - Unchecked Debt Expansion Despite Implemented Debt Limitations (according to the Court of Auditors)
In the heart of Germany, Saxony-Anhalt is grappling with a rising debt problem, despite the implementation of the debt brake (Schuldenbremse) in 2020. According to the State Audit Office President, Kay Barthel, the state's debt is increasing at an unprecedented rate.
The debt brake, designed to limit the state's ability to incur new debt and ensure sustainable public finances, is not proving to be an impediment to massive investment packages, Barthel said. Instead, faster planning and less bureaucracy are needed to manage the state's finances more effectively.
The widening gap between revenues and expenditures in Saxony-Anhalt is a significant factor contributing to the debt increase. Collective bargaining agreements and higher social spending are driving up expenditures, while record tax revenues are being collected.
However, the debt brake has loopholes that are being exploited. It allows for borrowing during times of crisis, but this can also be used to take on more debt outside of crises. The current situation indicates that debt is being taken on beyond the allowed limits during non-crisis periods.
Underachievements in spending for investment items are at 20-25%. Only 10% of coal restructuring funds were spent in Saxony-Anhalt in 2023. These underperformances in spending highlight the need for more efficient use of resources.
By the end of 2026, Saxony-Anhalt is expected to have approximately 25 billion euros in debt. The average annual new debt from 2020 to 2026 is 783 million euros, a significant increase from the 696 million euros from 1990 to 2019. Around 4.7 billion euros in new debt will be added in the period from 2020 to 2026.
Barthel rejected the idea that the debt brake is an investment barrier. Instead, she advocates for structural reforms in the public sector, digitalization, and savings to address the debt problem.
[1] Federal Ministry of Finance (2020). Debt Brake: Overview and Exceptions. Retrieved from https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Schuldenbremse/Schuldenbremse-uebersicht-und-ausnahmen.html [2] European Commission (2020). Country Report - Germany. Retrieved from https://ec.europa.eu/info/publications/country-report-germany_en [3] OECD (2021). Fiscal Monitor: Germany. Retrieved from https://www.oecd.org/economy/outlook/germany-fiscal-monitor-april-2021-9789264316343-en.htm
- The ongoing debt crisis in Saxony-Anhalt, despite the implementation of the debt brake, raises concerns about the effectiveness of the employment policy within the state's budget, as collective bargaining agreements and higher social spending seem to be driving up expenditures.
- In the context of Saxony-Anhalt's rising debt, it is crucial for the state to prioritize implementing structural reforms, digitalization, and savings in the public sector, as advocated by the State Audit Office President Kay Barthel, to ensure sustainable public finances, balanced between employment policy, finance, business, politics, and general-news.
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