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Balanced Budget Requirements and Debt Brakes Feasibility and Enforcement

Authors

  • Werner Heun

    Corresponding author
    1. Institute for General Theory of State and Political Sciences, Georg August University
    • Address for Correspondence: Werner Heun, Institute for General Theory of State and Political Sciences, Georg August University, Nikolausberger Weg 17, 37,075 Goettingen, Germany. Tel.: +49 551 394693; fax: +49 551 3922239; e-mail: staatsl@gwdg.de

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Abstract

Balanced budget requirements should achieve fiscal sustainability, avoid a burden on future generations and allow for flexible reactions to cyclical fluctuations in the economy. There are many types of balanced budget requirements and debt limitations with different stringency. These budget restraints have a significant effect when they are applicable. The overall effect on public debt is small since there are many ways to circumvent or evade the restraints. Therefore budget restraints have substantial negative side effects. Public debt is transferred into less controllable budget areas, the structure of governments becomes fragmented and the balance of power is shifted away from the democratically accountable legislature.

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