Proposal for Change in German Government Fiscal Policy.

Running head: A PROPOSAL FOR CHANGE IN GERMAN GOVERNMENT FISCAL
POLICY
A PROPOSAL FOR CHANGE IN GERMAN GOVERNMENT FISCAL POLICY
Name of the Student
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Author Note

A PROPOSAL FOR CHANGE IN GERMAN GOVERNMENT FISCAL POLICY
1
Table of Contents
Introduction................................................................................................................................2
Background of the study............................................................................................................3
Problem statement......................................................................................................................4
Rationale....................................................................................................................................4
The aim and objectives...............................................................................................................4
Research Questions:...................................................................................................................5
Literature review........................................................................................................................5
Concept of Debt Brake...........................................................................................................5
Concept of Black-Zero Budget..............................................................................................6
Concept of Fiscal and Monetary Policy.................................................................................6
Methodology..............................................................................................................................6
Research ethics.......................................................................................................................6
Limitation of the study...........................................................................................................7
Expected Outcome.....................................................................................................................7
Bibliography...............................................................................................................................8

A PROPOSAL FOR CHANGE IN GERMAN GOVERNMENT FISCAL POLICY
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Introduction
The economy of Germany is experiencing one of its highest economic growth in its
postwar history. The nation had performed extremely well with srong growth in employment,
stable and high economic growth rates and the social security system. Germany’s
performance was due to external factors which is like the expansionary policy of the Central
Bank of Europe or huge capital outflows from euro zone1.
Background of the study
From the recent news, it can be said that there are no counties in Europe with
excessive defecit. Though public debt still occurs eminent in some parts of the region.
France, Italy, Spain, Belgium and Greece are the countries who have debt-to-GDP ratios near
or above 100 per cent. With a increasing need for investment to upsurge domestic demand,
some European governments like Germany, Finland and Netherlands are under heavy
pressure to increase the government spending as only they have that fiscal space to do.
Germany falls into the top ranks globally with regard to economic policies. The economy of
Germany has been increasing steadily for a decade. Having fiscal space means having money
in the hand of government which means government can raise spending or decrease taxes.
Germany has a budget surpus of 1.2 per cent of its GDP. This implies about 13.5 billion euro
of tax money stays unspent which is a surplus which is set to remain last until 2021.
According to International Monetary Fund and the European Commission, Germany should
decline its surplus and spend it to the real economy. The example of Germany’s under
investment is the nation’s ageing rail infrastructure. According to the several reports in 2019,
there are huge rail infrastructure replacement backlog which need to invest close to 50 billion
1 Gadatsch, N., Hauzenberger, K. and Stähler, N., 2016. Fiscal policy during the crisis: A look
on Germany and the Euro area with GEAR. Economic Modelling, 52, pp.997-1016.