Copenhagen climate conference Germany has long prided itself on fiscal rectitude. But its reputation has taken several dents going back to German unification. The latest comes from an idea floated in the next government’s coalition talks, which would have involved fudging constitutional deficit limits. The ensuing political difficulty is, in fact, a trap of their own making.
After a burst of deficit spending, Chancellor Angela Merkel has been determined to reduce Germany’s indebtedness. This year she had the constitution amended to limit federal government structural deficits to 0.35 per cent of gross domestic product. While the ceiling does not come into force until 2016, deficits must start coming down as soon as 2011 – inconveniently for Ms Merkel’s CDU and her soon-to-be coalition partner the FDP, who together won the September elections on promises of tax cuts.
