Saxony's finance minister warns: New debts won't solve any problems!

Saxony's finance minister warns: New debts won't solve any problems!

In Saxony, the debate about new debts is causing a stir. Finance Minister Christian Piwarz expresses concern about plans to take out new loans in the upcoming state budget. In his opinion, this is “completely the wrong answer” to the structural problems facing the Free State. He emphasizes that the increased income should not be offset by increasing expenses. “We have to clarify what Saxony can afford in the future,” he explains.

These concerns are not unfounded. The running costs for the Free State are rising rapidly, and Piwarz warns of significant interest burdens that would result in new debts. The minister is calling for a rethink of the state budget to ensure that revenue is sufficient in the long term. “We have to shape the state so that we can get by with the resources we have,” he warns. At the same time, he speaks of a need to cut jobs in public administration in order to adapt the number of state employees to the declining population. The job cuts should be carried out effectively through digitalization, automation and the merger of administrative structures, with age-related departures also being taken into account.

National debt in context

High national debt has always been a hot topic in financial science. They are considered risky, especially when it comes to avoiding high interest charges. For example, the Maastricht criteria limit net borrowing to a maximum of 3% of GDP and public debt to 60% of GDP. Germany has made encouraging progress, but debts recently rose significantly as a result of the corona pandemic and the war in Ukraine.

According to the Federal Ministry of Finance, German national debt rose by 162 billion euros in 2021 to a total of 2.476 trillion euros. The debt ratio climbed from 68.7% to 69.3%. Figures like these make it clear how important it is to critically examine borrowing. There are suggestions to give more consideration to Modern Monetary Theory (MMT). The argument is that government spending could theoretically increase indefinitely as long as the resources are available. Nevertheless, Piwarz emphasizes that a responsible budget policy is essential for the Free State in order not to burden future generations.

What lies ahead for us?

The current situation represents a first: In view of the extraordinary emergency situation, a temporary exemption for debts was recently made possible, for example to deal with the corona pandemic. This could mean that states like Germany would be allowed to take on more debt again under certain conditions. Nevertheless, the question remains: How should we deal with this debt burden without endangering our ability to act?

“We have to ensure that future government spending is geared towards the common good and existing resources,” Piwarz concludes. Nobody has to fear for their job, said the minister. It remains exciting to see how Saxony and other German federal states will respond to these challenges. The course for the financial future must be set now and requires wise use of the available funds.

One thing is certain: fiscal policy will be crucial in the next few years to maintain the balance between income and expenditure. Responsible handling of state deficits is important not only for Saxony, but for everyone who lives and works in this country. n-tv describes the situation as dynamic and challenging, while bpb and Federal Ministry of Finance provide important contextual information on the state budget situation.