Fiscal deficit; budgetary deficit, government deficit

Public budgets continuously show higher expenditures than revenues. The rising debt ratio leads to an increase in inflation expectations and greater recourse to the capital market, – to rising interest rates, – to growing volatility on the financial markets, – to strong pressure on the central bank, because safeguarding the value of money can only be achieved by accepting high real interest rates and a significant appreciation of the exchange rate, which inevitably leads to losses in growth and employment, – to a restriction of the government’s room for maneuver in economic policy; because the growing interest burden at a time of low growth leaves hardly any room for choice, and – in a monetary community such as the euro area, to the fact that even states with balanced budgets must share the member’s unsound budgetary policy. – See deficit spending, deficit, deficit ratio, fiscal referendum, fiscal policy, monetary policy, liability, budget ratios, budget gimmicks, budget surveillance, lug-and-frog thesis, Methuselah syndrome, sustainability, nonaffectation principle, parafiscus, primary surplus, shadow debt, debt brake, Semester, European, sovereign debt crisis, sovereign debt pressure, Stability and Growth Pact, sunset proviso. – Cf. ECB Monthly Bulletin of February 2003, p. 53; ECB Monthly Bulletin of January 2004, p. 49 et seq. (with selected statistics), ECB Monthly Bulletin of March 2004, p. 60 et seq. (annotated overview of deficit levels of all countries), Deutsche Bundesbank Monthly Bulletin of April 2005 (detailed, comparative presentation), ECB Monthly Bulletin of April 2007, p, 95 et seq. (calculation of debt levels; definitions, overviews), Monthly Report of the Deutsche Bundesbank of February 2008, pp. 58 f. (developments since 2001; overviews), Monthly Report of the ECB of March 2010, p. 95 (fiscal policy considerations: four serious consequences of high budget deficits), Monthly Report of the Deutsche Bundesbank of July 2010, pp. 32 f. (possible cyclical effects of fiscal consolidation; overview; references), ECB Monthly Bulletin of September 2010, pp. 93 f. (fiscal consolidation is a prerequisite for disruptive growth), ECB Annual Report 2010, pp. 83 ff (costs and benefits of fiscal consolidation; references), ECB Monthly Bulletin of March 2012, pp. 115 ff (budget deficit and the business cycle), Deutsche Bundesbank Monthly Report of November 2012, p. 22 ff (government budget deficits in the euro area as a whole and in problem countries; overviews), ECB Monthly Report of May 2013, p. 93 ff (in-depth analysis of the current state of euro area members; overviews; references). – The current debt level can be found in the annex “Euro area statistics,” heading “Public finances,” section “Maastricht debt by type” of the respective ECB Monthly Bulletin.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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