| Rarely has a federal budget been subject to so much controversy as that for the coming year. Since the Federal Constitutional Court’s ruling in November 2023 on the federal government’s supplementary budget, public finances have been on everyone’s lips. Shadow budgets, special funds, and EU debt are fuelling the debate on proper and transparent budget management.
Against this backdrop, the June edition of our ZEW Monthly focuses on the topic of “Public Finances”. In collaboration with Deloitte, the ZEW team has developed a concept for target- and outcome-driven budget management, which has been acknowledged by the Federal Cabinet. Additionally, a ZEW study commissioned by the Foundation for Family Businesses shows that state regulation through market mechanisms increases acceptance and reduces costs.
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| Cohesion Policy is an important element of European solidarity. At the same time, it absorbs a significant share of the EU budget at a time when the EU is facing major new spending needs. How should the policy be adapted in the post-2027 programming period? With the support of the German Federal Ministry of Finance, an international network of researchers including ZEW economist Friedrich Heinemann has produced a series of in-depth studies on the design, impact, success conditions, governance and evaluation of Cohesion Policy. This event on 15 July 2024 in Brussels marks the launch of the resulting project report. At our event, members of the expert network will present their findings and hand over the report to representatives of the European Commission. Federal Minister Christian Lindner as well as the two EU Commissioners Elisa Ferreira (Cohesion and Reforms) and Johannes Hahn (Budget and Administration) will share their reflections on the future of the policy.
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| | | RESEARCH ON PUBLIC FINANCES |
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↗ EUROPEAN LIABILITIES ABSENT FROM GERMAN DEBT STATISTICS
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| Germany’s financial liabilities are larger than indicated in the official statistics on public debt. The reason for this is the EU’s debt burden, which does not appear in the national data. This European debt has led to hidden liabilities, which will soon account for nearly ten per cent of the German government debt. Costing 750 billion euros for taxpayers, the coronavirus economic recovery plan “Next Generation EU” (NGEU) in particular has brought about a financial burden for Germany which is not included in the German debt statistics.
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↗ DEMONSTRATING THE EFFECTIVENESS OF EXPENDITURE
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| On 10 April 2024, the Federal Cabinet acknowledged the final report on the 11th Spending Review, titled “Improving performance budgeting in the federal budget, with a particular focus on sustainability”. Since the 2010s, the federal government has consistently refined its budget management’s target and impact orientation through a series of important changes and innovations. The basis for this enhanced impact orientation is a report prepared by ZEW and Deloitte for the Federal Ministry of Finance.
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↗ MONEY ALONE DOES NOT SOLVE PROBLEMS
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| Federal, state, and municipal budgets are under strain, and tax revenues are declining. On 11 June 2024, ZEW President Professor Achim Wambach emphasised at a joint event by ZEW Mannheim and the Baden-Württemberg Ministry of Finance at BW-Bank Stuttgart that smart fiscal policy should aim to activate private capital. Dr. Danyal Bayaz, Finance Minister of Baden-Württemberg, and Sylvie Goulard, president of the Deutsch-Französisches Institut (dfi) in Ludwigsburg, discussed with Wambach their experiences from Baden-Württemberg, France, and the EU. The debate was moderated by Joachim Dorfs, editor-in-chief of the Stuttgarter Zeitung.
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| | ↗ SPECIALLY ALLOCATED FUNDS ENSURE MORE INVESTMENT IN THE FUTURE
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| A ZEW study shows that 20 per cent of the 2023 federal budget was spent on future-related expenditures. This share had previously fallen to 18.2 per cent during the COVID-19 pandemic. This figure comes from an indicator developed by ZEW called the future ratio (Zukunftsquote), which measures the proportion of expenditure that is highly relevant for future endeavours. The share of funds allocated for the future proved to be above average. The Digital Infrastructure Special Fund and the Climate and Transformation Fund were particularly future-oriented.
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| | How to read the graphic:
The future quota analyses the degree to which the federal budget ist forward-looking. In the broad variant, expenditure is taken into account to a greater extent in the future ratio than in the narrow variant. There is a noticeable drop in the future ratio after 2019 with the onset of the COVID-19 pandemic. A recovery sets in from 2022.
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↗ HIGH FUEL PRICES BOOST ELECTRIC MOBILITY
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| According to a study by ZEW and the University of Mannheim, rising fuel prices lead to more electric kilometres driven. It shows that drivers of hybrid vehicles cover the same number of kilometres at higher fuel prices as before, but reduce their fuel consumption by using the electric mode more frequently. Shorter charging times also contribute to more hybrids operating in electric mode.
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↗ QUOTAS ENHANCE SUSTAINABILITY OF COMPANIES
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| By incorporating women and men from diverse backgrounds, experiences, and perspectives, companies can leverage a broader spectrum of ideas and solutions. Moreover, a diverse workforce contributes to creating a welcoming work environment. “Evidence shows that companies with gender quotas and more women in leadership positions also implement more environmental and social initiatives,” explains ZEW economist Eline Schoonjans.
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↗ A SUMMER’S TALE FOR SOCIAL COHESION?
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| Major sporting events are often accompanied by discussions about whether they bring economic benefits to the host cities. The upcoming European Football Championship in Germany is no exception, as it has both supporters and critics. “A collective event can help generate positive momentum throughout Germany and strengthen the sense of community,“ says Nicolas Ziebarth, head of the Research Unit “Labour Markets and Social Insurance” at ZEW and professor at the University of Mannheim, on the 2024 European Football Championship.
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| | | In view of the weak growth, ZEW President Achim Wambach explains what needs to be done now and why the many layoffs in German companies aren't entirely negative. A Handelsblatt interview with Jan Hildebrand and Julian Olk.
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| | | | UPCOMING | |
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| | | Eleventh Annual MannheimTaxation Conference
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| The eleventh Annual MannheimTaxation Conference will take place on 5 and 6 September 2024 in Mannheim, Germany. We are happy to announce that Jennifer Blouin (University of Pennsylvania) and Niels Johannesen (University of Oxford) will be this year’s keynote speakers. The conference is organised by the Leibniz ScienceCampus MannheimTaxation, which is a joint initiative of the University of Mannheim and ZEW. MannheimTaxation aims to foster high-quality research in the broad field of taxation and provides a platform that brings together researchers from various tax disciplines.
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| | | | → CONTACT FOR QUESTIONS OR SUGGESTIONS ON THE CONTENT | |
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| | | | | ZEW – Leibniz Centre for European Economic Research
L7, 1 · 68161 Mannheim
Phone: +49 (0)621/1235-01
E-mail: zewmonthly@zew.de
Website: www.zew.de
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| | | | | Executive Directors:
Professor Achim Wambach, PhD; Claudia von Schuttenbach
Chair of the ZEW Supervisory Board:
Ministerial Director Dr. Hans Reiter
Registered Office: Mannheim
Local Court Mannheim HRB 6554
USt-IdNr.: DE188318292
Commitment to Data Protection
Detailed Legal Note
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