The paper analyses the mid-term fiscal perspectives in Germany against the backdrop of historically high tax rates, unusually high public deficits and high unemployment. As (western) German GDP-growth is unlikely to exceed 2.5 percent per year, unemployment will be at the best stagnant, high tax rates will persist and real disposable income per head will not rise noticeably. However, according to government's fiscal planning the deficit will decrease from 4.5 percent of the GDP in 1993 to 1 percent by 1998 and the debt-to-GDP ratio from 60 percent to 55 percent. The price for this remarkable reduction of public deficit and debt will be high: a constantly high tax burden of 45 percent of GDP and an expansion of public expenditures of nominally no more than 3 percent per year. In order to reduce the tax burden significantly, but also to expand growth-oriented public expenditures, e.g. for education, research, transport infrastructure and communication networks, the deficit target should be set at a less ambitious level of 2 percent of GDP.
Fritzsche, B., H. Gebhardt, U. Heilemann, H. von Loeffelholz and H. Rappen (1995), Konsolidierungs- und Wachstumserfordernisse – Fiskalperspektiven der Bundesrepublik in den neunziger Jahren. RWI-Mitteilungen Quarterly: Zeitschrift für Wirtschaftsforschung, 46, 1, 1-21