Economy & Politics

ColumnWhy the debt brake and black zero are forgotten

Christoph BrunsLyndon French

Well-sounding words and expressions are chosen when it comes to convincing the population of the virtue of politics in financial matters. The contortions that arise when excess money is spent with words such as “Stability Pact” are disguised, are misleading and sometimes funny. People are increasingly reminded of the times of the GDR, which, thank goodness, had faded, when the figureheads of the SED Politburo made every effort to present their country as a haven of peace, democracy and internationality. Walter Ulbricht’s sentence “Nobody intends to build a wall!”, Uttered on June 15, 1961, would have a chance of winning the competition for the lie of the century.

But what about the CDU’s promise before the introduction of the euro that no country would have to pay for the debts of another country? The euro bonds are now a done deal. And isn’t the celebrated debt brake a farce that doesn’t put a stop to the rulers when the temptation is particularly great to give free rein to the spending of borrowed money.

The caravan has long since moved on

With the ‘black zero’, things are hardly any different. It is a fair weather zero! The art of smart budgeting, however, is not to avoid taking on additional debt in times of abundant tax revenues. Rather, the litmus test of household comes when things are more modest on the income side. The Maastricht criteria, which have never been complied with anyway, are no longer mentioned in the public debate.

Just remember that no country could adopt the euro today because no country would qualify. One could also say that no country has qualified for the euro today. As long as it is true, “if the euro fails, Europe fails”, nobody will struggle too hard with the situation. The caravan has long since moved on, the debt culture firmly established everywhere.

The breach of contract and promises and commitments not kept are always justified with special economic situations or crises. One still remembers the blue letter that former Chancellor Schröder received from Brussels. The fact that in good times you could have built up reserves is always kept secret. Wasn’t it John Maynard Keynes who recommended such countercyclical budgeting some 100 years ago?

Today’s debt is limiting tomorrow’s growth

The great and far too little known humanist Johann Gottfried Seume, contemporary of Goethe, named and aptly assessed the problem of the state debt economy in his autobiographical report ‘Walk to Syracuse’:

“The steering rope with bad money is known; you lead on as long as you can. … In my opinion, nothing is more perishable for the state and nothing in the state more unfair than actual state papers, as our states are now set up. … Every national debt is a crutch, and crutches are only for the lame. “

Today’s debt is limiting tomorrow’s growth, which for several and above all demographic reasons will be meager anyway. This is not good news for the younger generation.


Christoph Bruns is fund manager, board member and main shareholder of the investment company Loys AG. Here you will find more columns by Christoph Bruns


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