Consolidating Germany's Finances: Issues in Public Sector Spending Reform

While the German federal fiscal system has been successful in promoting a high standard of living even in regions whose economic capacity is low, tensions have emerged. Firstly, it has been difficult to ensure a sustainable fiscal policy, and the size of the overall deficit makes it difficult for the automatic stabilisers to operate freely. Second, overlapping responsibilities between governments and the financing of public spending programmes via inter-governmental transfers provide individual governments with little incentives to contain costs and demand. Thirdly, social spending often discourages a higher utilisation of labour. Furthermore, public expenditure is going to have to cope with increasing pressure due to the substantial deterioration of the old-age dependency ratio projected for the next years and decades and the continuing fiscal burden associated with reunification. Hence, continuing the process of fiscal consolidation and improving the quality of government ... La reforme des depenses dans le secteur public : Principaux enjeux Le systeme budgetaire federal allemand est parvenu a promouvoir un niveau de vie eleve meme dans les regions a faible potentiel economique, mais des tensions sont apparues. Premierement, il s’est revele difficile de maintenir une politique budgetaire viable et l’ampleur du deficit total ne permet guere de laisser jouer les stabilisateurs automatiques. Deuxiemement, le chevauchement des competences des differentes administrations et le financement des programmes de depenses publiques par des transferts interadministrations n’incitent guere les responsables a maitriser les couts et la demande. Troisiemement, les depenses sociales decouragent souvent une utilisation accrue de main-d’œuvre. De surcroit, la forte degradation du taux de dependance des personnes âgees prevue dans les prochaines annees et decennies mais aussi le fardeau budgetaire persistant lie a la reunification engendreront des pressions grandissantes sur la depense publique. Par consequent, les tâches les plus ...