Together with the Budgetary Affairs Commission (BAC) of the Standing Committee of the National People’s Congress of the People’s Republic of China, the Sino-German Legal Cooperation Program of the Deutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ) GmbH organized a study tour on the subject of national debt on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) from June 30 to July 9, 2024. The six-member delegation was led by Vice Minister XIA Guang, member of the Standing Committee of the National People’s Congress (NPC) and deputy chairman of the Budget Affairs Commission. The background to the trip is the efforts of the Chinese leadership to keep public debt, especially that of local governments, under control.
In Paris, the delegation visited the Organization for Economic Cooperation and Development (OECD). Margit Molnar, Ján Stársky, Müge Adalet McGown, Alvaro Pina and Yvan Guillemette presented the public debt situation and the institutional framework in selected OECD countries and reported on recommendations for debt reduction and creating financial space. For example, for China, Ms. Molnar suggested giving local governments more responsibilities in the areas of education and health care and adjusting the financial resources of local governments to the tasks assigned to them.
In The Hague, Mr. Joost Sneller, Chairman of the Committee on Public Expenditure of the Second Chamber of the Dutch Parliament (Tweede Kamer der Staten-Generaal), received the delegation and held a technical discussion on the role of parliament in controlling public debt.
At the Dutch Ministry of Finance, Mr. Allard Postma presented the framework of Dutch fiscal policy, particularly the function of expenditure ceilings according to multi-year financial planning. He emphasized the importance of independent fiscal institutions such as the Dutch Bureau for Economic Policy Analysis (Centraal Planbureau, CPB). When presenting the financing of local authorities, Mr. Roy Staal particularly addressed the criteria according to which the central government distributes state funds and the options available to local authorities to generate their own income.
In Berlin, Dr. Marco Haase, head of the Sino-German Legal Cooperation Program at GIZ, presented the state structure of the Federal Republic of Germany and reported on the debt situation in Germany. Prof. Dr. Markus Heintzen, Professor of Constitutional, Administrative and Tax Law at the Free University of Berlin, explained the constitutional and European legal limits of national debt in Germany. In particular, he discussed the prohibition of debt in the Basic Law and its exceptions and presented the ruling of the Federal Constitutional Court of November 15, 2023, on the question of the constitutionality of the 2023 federal budget. In the discussion, the delegation returned to the relationship between constitutional and European debt limitation.
Stefan Anton, main speaker of the German Association of Cities, reported on the debt situation of German municipalities. The expert discussion concerned the reasons for the municipalities’ debt, the measures to reduce excessive debt and the responsibility of the federal and state governments for municipal finances.
On Friday morning, the chairman of the Bundestag’s Budget Committee, Prof. Dr. Helge Braun, received the delegation in the Bundestag’s Paul Löbe House and informed the delegation about the discussion on the 2025 federal budget. The delegation then held an expert discussion with the members of the Budget Committee Prof. Dr. Helge Braun, Dr. Yannick Bury (CDU/CSU), Dr. Ingeborg Gräßle (CDU/CSU) and Mr. Karsten Klein (FDP) about the different views of the parliamentary groups in the Bundestag on the debt brake in the Basic Law. The representatives of the SPD and Buendnis 90/Die Gruenen were unable to attend due to current circumstances.
At the Federal Ministry of Finance, Dr. Judith Hermes, Head of the Department for European Policy and International Financial Policy, presented the reform of the Stability and Growth Pact and the European fiscal rules. Dr. Heinen, Head of the Department for Financial Policy and Economic Policy, spoke about the current economic and financial situation in Germany, the debt brake in the Basic Law and the importance of German fiscal policy for the stability of the Euro.
On Friday afternoon, the delegation visited the Ministry of Finance and for Europe of the State of Brandenburg. Mr. Ulrich Hartmann, Head of the Budget Department, and the heads of department Dr. Frank Rehbein and Peter Struppek explained the importance of the constitutional debt brake for the State of Brandenburg, presented the debt situation of the municipalities in Brandenburg and explained the debt repayment program of the State of Brandenburg. The delegation asked questions about the reasons for municipal debt, the lenders of municipal debt and the functioning of the Brandenburg debt relief program.
On the last day of the trip, Mr. Patrik Kraulich, Deputy Head of the Department of State Assets and Debt Management, Municipal Financial Equalization and Construction and Real Estate Management, as well as Dr. Kerstin Kuempel and Mr. Kai Hofmann presented the debt brake in the Hessian constitution, the debt situation of the Hessian municipalities and the program to relieve the municipalities of their debts using the special assets of the “Hesse Treasury” (Hessenkasse) at the Hessian Ministry of Finance in Wiesbaden.
Finally, the delegation visited the Federal Republic of Germany Finance Agency GmbH in Frankfurt am Main. Ms. Eva Grunwald, member of the management board, Mr. Thomas Weinberg, Head of the Trading & Issuing Business Division, and Mr. Christian Wellner, Head of the Strategy Division, explained the tasks of the Finance Agency, which, on behalf of the Federal Ministry of Finance, as a federal company to provide financial services for the federal government, such as ensuring the federal government’s liquidity or issuing federal securities. They particularly emphasized the importance of green federal securities as part of the German sustainability strategy.