Risk of a fiscal setback
Risk of a fiscal setback rising
In compliance with the constitutionally anchored debt brake rules, the federal
government is likely to exploit the above fiscal scope in this legislative period.
That said, the new government might stick to the “black zero” (i.e. No new net
borrowing).
Moreover, it is to be expected that the 2018 budget will have to be
adopted (retroactively) in the course of next year, as the formation of a new
government is taking longer than expected and will probably last well into next
year.
Against this backdrop, the full impact of the fiscal impulse (from lower taxes and
higher spending) is unlikely to be felt before 2019. Thanks to the ECB’s
extremely hesitant exit from its zero interest rate policy, the resulting further
decline in interest payments (to below 1% of GDP) and solid growth, the debt-to-
GDP ratio (general government, according to the Maastricht definition) looks set
to remain on the decline, although fiscal policy is turning increasingly pro-
cyclical.
By 2019, it could already undershoot the Maastricht limit
of 60% of GDP (see chart 36).
EU Forecast
euf:ba18h:131/nws-01