When Borrowing Nothing Costs Too Much

Call me Mr. Thrifty.
  • Why it matters

    Why it matters

    The German government is totally focused on reducing debt, but it is stopping much needed investments in public infrastructure.

  • Facts


    • Germany’s gross domestic product (GDP) expanded by just 0.4 percent in 2013.
    • Strong consumer spending driven by record employment kept the country out of recession.
    • The government is working on models where private investors would take over financing of projects that up to now have been public.
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Wolfgang Schäuble has come closer to his grand goal of a balanced budget than any German finance minister in the last four decades. So it was no surprise when he submitted his budget this week and called for staying the course on fiscal discipline. It’s a sign of personal ambition, but above all deep conviction on his part.

Mr. Schäuble, a member of Chancellor Angela Merkel’s conservative Christian Democratic Union (CDU), draws one big lesson from the euro crisis:  Solid finances should be government’s top priority. And this is not wrong. Especially since Mr. Schäuble has accomplished something many in Europe still consider impossible: He has cut Germany’s budget deficit and yet Europe’s largest economy has still grown.

There is no doubt that Mr. Schäuble has performed a great service by eliminating excessive, debt-inducing spending. In good economic times, the state should be able to do without a deficit. So in this respect, one might even say that Mr. Schäuble has had too little ambition and not cut enough in recent years.

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