Balancing, Consoldiation, Debt Reduction - Restructuring Task or Inflationary "Escape?"

Market Economy Foundation Conference on 1 December 2010 in Berlin

Photos: Dirk Laessig

Market Economy Foundation Conference on 1 December, 2010 in Berlin

The high level of state indebtedness in many parts of Europe raises fears of insolvency and inflation. With the balanced budget amendment in the Constitution and the European Union Stability and Growth Pact, national and international rules mandating maximum debt levels exist, but these must be adhered to. To this end, explicit debt is only one side of the coin. A responsible state must also take into account implicit debt, the imbalance between future income and expenditures, in its fiscal planning, just as the Market Economy Foundation does in its annual long-term balance sheet project.

The public debt is no abstract problem, and affects all citizens of a country. In Germany too, future consumption and political maneuvering room is restricted by high public debt levels today. Therefore, vigorous fiscal consolidation must play a role. But how can fiscal consolidation of public finances in the near future and on both federal and state levels be managed? Is it possible for a highly indebted entity to become entirely debt free? There is also the question of how to best manage debt reduction from an economic perspective – should receipts be increased or rather expenditures decreased? How can growth and employment be strengthened despite consolidation in order to raise future public receipts?

We have discussed the large challenge of debt reduction, as well as possible solutions including those from the Kronberger Scientific Advisory Council, with renowned experts from the field.

Below, you can access the presentations of contributors to this discussion:

Slides from Prof. Raffelhüschen (German)

Slides from Prof. Feld (German)

Slides from Magnus Staehler, Former Mayor