Policy Note 1: What are the benefits of the debt brake?

Since joining the single European currency, Austria has been subject to a rule-based fiscal policy (Stability and Growth Pact). Nevertheless, the debt level and new borrowing have reached historic highs. The Austrian federal government has announced that it will implement a sustainable reduction in public debt by anchoring a debt brake in the constitution.

The EcoAustria research institute describes the fiscal policy consequences of the planned debt brake. Theoretical arguments for and against the implementation of a rule-based fiscal policy are presented and international experiences are outlined. Finally, recommendations for accompanying measures that should contribute to the success of the debt brake are derived from the analysis.