Intriduction:

German fiscal policy is nowadays often presented as a shining example: The fiscal exit after the recession in 2009 was quick and apparently smooth: the 2010 budget deficit of 4.2 per cent of GDP was turned into a small surplus of 0.1 per cent of GDP by 2012. At the same time the German economy recovered very strongly from the crisis with comparatively very low and soon even decreasing unemployment. According to conventional wisdom one major reason behind the German public finance success story is the fact that Germany had already incorporated a debt brake into its Constitution back in the summer of 2009, just before the onset of the Euro crisis. According to the brake, from 2020 onwards the structural general government deficit must not be higher than 0.35 per cent of GDP. When most EU governments pledged in the Fiscal Compact at the end of 2011 to introduce stricter (constitutional) limits on public debts and deficits, this resulted primarily from an acute sense of panic in the face of the continuing escalation of the euro crisis. But the fact that they resorted to the German approach of constitutionally fixed debt brakes certainly also had something to do with the allegedly easily demonstrable success of the German example. However, the idea that the German success in terms of budget consolidation is the result of a well-thought-out economic strategy that could therefore serve as a role model for other countries does not stand up to closer scrutiny.