ABSTRACT
This chapter focuses on the most important budgetary reform in Germany: the introduction of a second-generation fiscal rule requiring structurally balanced budgets and its impact on the federal and subnational government levels. It describes the window of opportunity presented by the crisis in 2009 which paved the way for the introduction of the binding fiscal rule in the constitution. The chapter analyses the essential elements of this reform as well as the changes in budgeting practices it engendered, with a special focus on expenditure ceilings set in a top-down manner. It focuses on the impact of the reforms thus far, improving allocative efficiency and effectiveness in the German public sector. The chapter explores the variety of approaches chosen by the 16 Lander, implementing new fiscal rules and changing budgetary processes in response to the debt brake and highlights the impact of the debt brake on fiscal results and public administration.
