Warum es auf stabile Staatsfinanzen ankommt

This article reviews the importance of fiscal sustainability against the background of rapidly rising public indebtedness in Germany. The need for quickly improving defensive capabilities and repairing public infrastructure can justify a temporary rise in government debt. Yet, it is key to stabilize government debt and achieve a declining path for the debt ratio in the medium term to regain room for maneuver in future crises. Fiscal sustainability is essential to ensure economic growth and price stability and to sustain the government’s ability to act. The article considers the current outlook for the debt ratio, the size of government and the interest rate burden of public debt. It discusses the need for effective fiscal rules and the shortcomings of the recently changed German debt rule.