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The Federal Audit Office gives the Federal Government a bad report for its financial policy before and during the Corona crisis.

The federal budget for 2022 presented in its key figures “relentlessly reveals the clayey feet of the federal budget,” says Federal Audit Office President Kay Scheller.

As a way out, he considers a spending moratorium by the next federal government to be inevitable.

Because it is already clear that in view of gaps in the double-digit billions, the usual cash drop alone will not be enough.

“Rather, at the beginning of the 20th electoral term, a consolidation concept with concrete proposals is required as to how the federal finances can be made fit for the upcoming challenges,” says Scheller.

Dealing with the financial burdens of the pandemic will require “considerable effort and the courage to make unpopular decisions”.

From the point of view of the Federal Audit Office, the fact that necessary reforms failed to materialize in the economically good years after the global financial and economic crisis of 2009 and 2010 is now taking revenge.

“The existing leeway was not used sufficiently for future-relevant focal points.

Today they are no longer available, ”says Scheller.

Source: WORLD infographic

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Scheller considers it unrealistic that the federal government can simply grow out of debt again, as the current federal government hopes.

Unlike after 2010, the federal budget will not be relieved this time by steadily falling interest expenses for debt servicing, since the interest rate level is already at zero.

"And a return to steadily increasing tax revenues as before the crisis cannot be realistically expected at the moment," said Scheller.

The Court of Auditors considers some of the current economic forecasts that are available for the period after the crisis to be too optimistic.

The Federal Audit Office, whose task it is to check the proper use of tax funds, lists the members of the budget committee of the German Bundestag on 21 pages, where it sees the largest gaps for the coming years.

The "worrying financial situation" is particularly evident in the federal government's net borrowing.

According to the plans of the federal government, the additional liabilities will increase from zero to 452 billion euros between 2020 and 2022.

For this year alone, the federal government is planning new debts amounting to 240 billion euros, with another 80 billion euros to be added in the coming year.

This corresponds to almost half of the national debt that the federal government has accumulated in the previous 70 years since 1950, the Court of Auditors calculates.

Source: WORLD infographic

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Scheller points out that state funds are not available indefinitely and not for every purpose either.

"Without structural reforms, it will not be possible to remedy the financial consequences of the corona pandemic," he says.

It is more important than ever to set clear priorities for spending.

This includes checking all social transfers to determine how necessary and targeted they actually are.

The same applies to subsidies such as the diesel privilege.

Those who drive a diesel vehicle fill up cheaper because the fuel is taxed less.

The Court of Auditors has been criticizing this for a long time.

Like the opposition in the Bundestag, the supervisors of the federal budget are annoyed that in the medium-term financial planning of Finance Minister Olaf Scholz (SPD) for the years 2023 to 2025 already foreseeable burdens are not taken into account at all and only insufficiently.

These include promised funds for day care, defense and development aid.

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"Even for a federal subsidy to compensate for additional burdens in social long-term care insurance, there is currently no financial provision," the report says.

There is a fundamental effort to be as little concrete as possible before the federal election in autumn 2021 when it comes to setting budgetary priorities.

The Court of Auditors is also addressing the need to abolish or at least reform the debt brake anchored in the Basic Law, which has been repeatedly called for by the ranks of the Greens and the Left Party.

From his point of view, this would be “tantamount to capitulating to the problems” and would endanger the sustainability of the federal finances in the long term.

This means that there is a risk that the federal government will have to pay significantly higher interest rates for its bonds on the capital markets and that financial leeway will become narrower in the years to come.

President Scheller counters all critics of the debt brake by saying that there is simply no empirical evidence that they would restrict public investment.

The decline in the public investment rate, particularly in the municipalities, began long before the debt brake was introduced.

In addition, politicians have used their fiscal leeway for other purposes due to low interest rates or the good development in the labor market.

Source: WORLD infographic

The problems for households will not diminish beyond the year 2025 and the next federal government.

Because then the crisis costs have to be paid off.

The law on the debt brake stipulates that the additional loans taken out during an exceptional emergency situation must be repaid over a fixed period in fixed installments.

The repayment obligations for new debt in the crisis years 2020 to 2022 will initially amount to a bearable two billion euros per year from 2023, but according to the budget they will rise to 18.9 billion euros from 2026 - this amount will be anew every year until 2042 due.

Dependent on surpluses

This means that from 2026 the federal government will inevitably have to rely on budget surpluses so that it can meet its repayment obligations.

Because then, according to current forecasts, the necessary repayment will make up 0.49 percent of annual economic output.

However, the debt brake only allows a net borrowing of 0.35 percent per year.

Corona debts cannot be settled with new debts alone.

If the debt brake in its current form persists beyond the next federal election, there will inevitably have to be a clear prioritization of expenditure - or the federal government will have to develop additional tax sources.

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