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Thirdly, the population is aging in Germany, America

and in Asia very strongly. For this, not enough care

has been taken. Neither by way of the reform of the

social entitlement requests nor by the way of building

up financial reserves by way of decreasing debt. Also

Germany has a significant lack of carrying capacity for

debt, and it should stay out of self complacency. The

measures of the past years have again increased the

expenses for social entitlements: the curse of the good

deeds in good times.

Fourthly, the quality of the fiscal measures does decide

about the results of the reduction of debts. Reductions,

for example the reduction of state expenses for

consumption, are better for producing growth and trust

than increasing the taxes. As to this, one should know,

that the most Western World Countries already have an

excessive state quota in percent of GDP. In Europe, the

expenditure of states on average is short of 50 % of GDP,

in France and in Scandinavia it is significantly above this.

In Germany, the state quota is at short of 45 % of GDP.

In Eastern Asia, the states on the contrary, are spending

only 20 or 25 % of GDP. Lower expenditures, in the right

area, are improving, by way of more efficiency and less

bureaucracy, the incentives for labour and investments,

and they are also further lowering at the same time the

budget deficits.

But there also exist other arguments for a growth friendly

consolidation and reduction of debt. Only through

this way we can guarantee, that in the next period of

economic weakness or financial crisis, all countries will

have enough leeway in order to not again loose the trust

of the markets and in order not again to slide into a crisis

of the financing of states.

A solid financing of the states is protecting from ad hoc

saving measures in the “emergency”, which are often

cutting back expenses in the wrong area, for instance,

when it comes to investments. They are permitting a

long term strategy, which also leaves more room for the

financing of new challenges, like the costs for refugees

or additional expenditures for the internal and external


Such a strategy creates trust, which leads to more

consumption and investment. Economists are calling this

non-keynesian (trust-) effects, which do work against the

negative demand effects of the consolidation.

With this, we arrive at the subject of credibility of

politics and institutions. When economist do argue that

with higher expenditures one can accelerate strongly

the economic growth, so that one can easily defer

consolidation to tomorrow, because such measures

do self finance themselves, then this is naïve. Politics is

never so perfect and can never be steered in a way, as

economists do assume. Such statements in addition

create expectations in the population, which cannot be

fulfilled. Expectations about the capability of planning

of the economy, about the increase of income, about

equality, about safety. The economists are sending

politics into the hamster wheel treadmill of our wishful

thinking, instead of giving recommendations how one

can make the best out of the real world.

Naivety and levity are also characterizing, how several

economists and politicians are dealing with the European

Maastricht treaty for stability and growth as part of the

Euro Currency

Treaty framework. Effectively, it is one of the most

important institutional cornerstones of the currency

union. It is meant to show to the governments limits for

the indebtedness. But evermore exceptions and special

situations are rather increasing the impression of an

arbitrary application.

It is extremely regrettable, that the EU-Commission has

just recently deferred the decisions about a tightening

of procedures against deficit sinful countries. A lot is

therefore speaking for an execution of the stability treaty

by way of an independent authority, in order that trust

will be created and expectations of a solid financing of

states will be reinforced.

The solid financing of states is also necessary in order

that for the European Central Bank the way out of the

unconventional monetary policy will not be closed.

Too high government indebtedness implies, that the

European Central Bank, ECB, by selling off again and

again its previous government bond purchases or by way

of raising of interest rates, may cause market turbulences

and thus the ECB may be hindered in the fulfilling of the

European Central Bank´s mandate. This scenario the

economists call “fiscal dominance”. It would do great

damage to Europe, economically and institutionally.

Thus, there is much at stake. The financing of the states is

indeed really at the crossroads.

Source: Frankfurter Allgemeine Zeitung, Germany,

Frankfurt amMain, Germany, June 16, 2016.

Responsible for translation: GEFIU, the Association of

Chief Financial Officers Germany; translator: Helmut