German debt clock reverses for first time in 20 years

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Berlin’s campaign for fiscal discipline took a small but symbolic step this week: For the first time in more than two decades, Germany’s closely watched “debt clock” is running backwards.

The clock, which despite its name looks more like a counter, was rescheduled on Jan. 1 to accommodate new federal and state budget plans. It is now slowing to a rate of €78 per second, the first time it has shown that the country’s overall public debt is falling. In 2009, following the financial crisis, it showed that German debt was increasing at a rate of more than €4,400 per second.

The Schuldenuhr is maintained by the German Taxpayers’ Federation (BdSt) and is prominently displayed outside the group’s headquarters in Berlin.

Until this week, its bright red figures were a reminder of Germany’s deteriorating fiscal situation: since June 1995, when the clock was set, debt per capita has fallen from €12,830 to its current level of €23,827.

More recently, however, it has seen a steady improvement in the country’s public finances, with Angela Merkel’s government enforcing a balanced budget every year since 2014. Germany’s booming economy means the next government is set to benefit from a budget surplus of around €30 billion over the next four years, sparking a political debate over whether the money should be spent on increased public investment or tax cuts.

The inversion is only reflected on the debt clock now because its calculations are based on official budget legislation rather than actual spending and borrowing decisions made by federal and regional finance ministers.

Reiner Holznagel, President of the BdSt, said Germany was “on track” in terms of balancing the budget, but insisted that political leaders needed to do more. “All these fine reports on surpluses and budget balances made citizens believe that everything was fine on the debt side. This is not the case. We don’t even meet the Maastricht criteria,” he said, referring to the EU-mandated target of keeping public debt below 60% of economic output.

The scale of Germany’s debt problem is evidenced by the fact that at the current rate of decline, it would take around 800 years to reduce the total debt of 1,973 billion euros to zero.

Despite his role as a leading advocate for German taxpayers, Mr Holznagel said the country’s improved fiscal situation should not be used just for tax cuts. Instead, he called for new measures to reduce debt, alongside tax cuts and increased investment.

“We need a budget that reduces the debt in an orderly and active way, and we must ensure that all [of Germany’s] federal states not only have a balanced budget, but are actually reducing debt,” he said.

Founded in 1949 to push for greater transparency in public finances, the BdSt has around 250,000 paying members. Besides his management of the debt clock, he is best known for his reports documenting wasteful public sector spending.

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