Skip to main content
SpringerLink
Log in

The german stability program: A quantitative assessment

  • Published:
Atlantic Economic Journal Aims and scope Submit manuscript

Abstract

In the Maastricht Treaty and the European Stability and Growth Pact, it was recognized that high public deficits and debt levels would endanger the success of the European Economic and Monetary Union. In its stability program, updated in December 2001, the German government published its objective to achieve a balanced general budget in the year 2004. The budget of the central government should be balanced in 2006 [Bundesfinanzministerium, 2001]. This paper analyzes the effects of strict budget consolidation policies on important macroeconomic variables like inflation, unemployment and GDP growth. It is shown that a balanced budget as early as 2004 would necessitate high public consumption and investment. These should be financed by higher indirect taxes, whereas social security contribution rates should be reduced to bring unemployment down.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Federal Republic of Germany, Federal Ministry of Finance (Bundesfinanzministerium).German Stability Programme, December 2001 Update, Berlin, December 2001.

  • Carlberg, Michael.Economic Policy in a Monetary Union, Berlin et al.: Springer, 2000.

    Google Scholar 

  • Clements, Mike; Hendry, David. “Macro-Economic Forecasting and Modelling,”The Economic Journal, 105, 1995, pp. 1001–13.

    Google Scholar 

  • Deutsche Bundesbank. “Stellungnahme des Zentralsbankrates zur Konvergenzlage in der Europäischen Union im Hinblick auf die dritte Stufe der Wirtschafts- und Währungsunion,”Monthly Bulletin, April 1998, pp. 17–40.

  • Dreger, Christian; Brautsch, Hans-Ulrich. “Dokumentation. Das Makrooekonomische Modell des IWH - Version 1.0,” IWH Discussion Paper 55, 1997.

  • Karbuz, Sohbet; Matulka, Josef; Neck, Reinhard. “OPTCON: An Algorithm for the Optimal Control of Nonlinear Stochastic Models. User Manual.” Discussion Paper 284, Department of Economics, University of Bielefeld, 1994.

  • Lucas, Robert E., Jr. “Econometric Policy Evaluation: A Critique,” in: Karl Brunner, Alan Meltzer, eds.,The Phillips Curve and Labor Markets, Amsterdem, 1976, pp. 19–46.

  • Matulka, Josef; Neck, Reinhard. “OPTCON: An Algorithm for the Optimal Control of Nonlinear Stochastic Models,”Annals of Operations Research, 37, 1992, pp. 375–401.

    Article  Google Scholar 

  • Neck, Reinhard; Karbuz, Sohbet. “Optimal Budgetary and Monetary Policies under Uncertainty: A Stochastic Control Approach,”Annals of Operations Research, 58, 1995, pp. 379–402.

    Article  Google Scholar 

  • ——. “Optimal Control of Fiscal Policies for Austria: Applications of a Stochastic Control Algorithm,”Nonlinear Analysis, Theory, Methods & Applications, 30, 1997, pp. 1051–61.

    Google Scholar 

  • ——. “Optimal Macroeconomic Policies with and without the Monetary Instrument,” in: Ulrike Leopold-Wildburger et al., eds.,Modelling and Decisions in Economics. Essays in Honor of Franz Ferschl, Heidelberg et al.: Physica, 1999, pp. 255–68.

    Google Scholar 

  • Sutter, Matthias.Der Stabilitäts- und Wachstumspakt in der Europäischen Währungsunion. Grundlagen, Abstimmungsmacht und Glaubwürdigkeit der Sanktionierung übermäßiger Defizite, Baden-Baden: Nomos, 1999.

    Google Scholar 

  • Tüselmann, Heinz Josef. “Economic Developments in Germany and Their Impact on Europe,” in: Frank McDonald; Stephen Dearden, eds.,European Economic Integration, Second edition, London: Longman, 1994, pp. 323–43.

    Google Scholar 

  • Welfens, Paul J. J. “Transatlantic Growth Differentials, ICT Dynamics, Fiscal Policy and the Fall of the Euro,” Discussion Paper 82, University of Potsdam, European Economy and International Economic Relations, 2001.

  • Weyerstrass, Klaus; Neck, Reinhard. “Towards an Objective Function for Slovenian Fiscal Policy-Making: A Heuristic Approach,” in: Andranin Tangian; Josef Gruber, eds.,Constructing and Applying Objective Functions. Lecture Notes in Economics and Mathematical Systems 510, Berlin et al.: Springer, 2001, pp. 366–89.

    Google Scholar 

  • Weyerstrass, Klaus; Neck, Reinhard; Haber, Gottfried. “Optimal Monetary and Fiscal Policies for Slovenia Under Flexible and Fixed Exchange Rates,”Central European Journal of Operations Research, 8, 3, 2000, pp. 209–23.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Halle Institute for Economic Research, Germany

    Klaus Weyerstrass

Authors
  1. Klaus Weyerstrass
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Weyerstrass, K. The german stability program: A quantitative assessment. Atlantic Economic Journal 30, 320–334 (2002). https://doi.org/10.1007/BF02298428

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02298428

Keywords

Search

Navigation