According to calculations in the Federal Ministry of Finance‘s 2018 financial
report, the maximum permissible amount of net borrowing at the federal level is
roughly EUR 10.7 bn in 2018, plus just under EUR 11 bn per year for the period
from 2019 to 2021.
The maximum permissible amount of net
borrowing is the sum of a structural component (0.35% of GDP), a cyclical
component (contingent on the utilisation of production potential) and a third
adjustment component, which takes account of financial transactions earmarked
in the federal budget (for example, privatisation proceeds – which constitute a
financial transaction – cannot be used under the debt brake rules as a means to
increase the fiscal scope).
The cyclical component provides additional scope for
federal net borrowing in phases of under-utilisation of aggregate productive
capacities (negative output gap), whilst confining it in phases of over-utilisation
(positive output gap). As the economy is gathering steam (and the growth
outlook is brightening visibly), the scopes confined under the debt brake for the
years ahead ought to be much smaller than assumed in the 2018 financial
In concrete terms, this can be attributed to the fact that the
revisions to the Ministry of Finance’s estimates now point to a positive output
gap (resp. An over-utilisation of productive capacities) in the years ahead (in
contrast to previous expectations of a slightly negative output gap).