Rethinking Germany's Debt Brake: The Amortisation of Emergency Loans

Germany's debt brake faced significant challenges during the Covid-19 pandemic and now faces public criticism. The Federal Constitutional Court invalidated the 2021 federal budget due to unlawful attempts to bypass the debt brake. In early 2024, the Board of Economic Advisers reignited debate with reform proposals, including modifying the prompt repayment requirement for emergency loans, which are currently not promptly repaid. Implementing the Board's proposal would establish economically rational practices on a solid legal foundation.