Germany's budget crisis deepens as economists warn of fiscal collapse
The federal budget is "anything but sound," Andreas Peichl, head of the Ifo Center for Public Finance in Munich, told newspapers of the Funke Mediengruppe in Thursday's editions.
He urged the government to review all spending and subsidies, warning: "New borrowing is driving up interest payments and further shrinking fiscal flexibility, while the risk of misusing special funds remains unresolved."
By contrast, Peichl called for higher taxes on alcohol, tobacco, and a new sugar levy—but stressed that the revenue should fund prevention, not plug budget gaps. "Only then can we cut future healthcare costs," he explained.
Emilie Höslinger, of the Ifo Center for Macroeconomics and Surveys, told the Funke papers that while the debt brake is formally being observed, it contains too many loopholes to fill fiscal shortfalls. As a result, the pressure for consolidation and reform that the rule was meant to enforce has vanished. "Delayed reforms and soaring interest costs will be a burden on the younger generation," Höslinger warned.
