Abstract

The Contribution of the Administration to the Consolidation of Public Finances

Considering Germany's large amount of explicit and implicit public debt, its newly introduced and very ambitious constitutional “debt brake” as well as the not yet exactly measurable extent of its obligations under the European Stability Mechanism, the consolidation of public finances will be the most important topic in financial politics over the next years. So far, the academic discussion has concentrated mainly on the legislator's possibilities to reduce public spending (especially in public welfare) and to raise tax revenue. This article takes a different perspective and asks for the administration's opportunities to contribute to budget consolidation. In the first part of the study, the author looks at ways to reduce the executive branch's costs. He analyses the extent to which administrative discretion, privatization, public procurement decisions, management of property and solvency, and public-private-partnerships should be used to achieve this target. This includes a close look at possible negative consequences. The importance of a system of risk management for the avoiding costs is emphasized. The second part of the article shows possible ways for the administration to increase its income. On the one hand, it deals with classic forms of public fundraising such as taxes, other public charges and fines. On the other hand, ways of earning money through financial investments, selling public assets (including sale-and-lease-back-procedures and cross-border-leasing), and other economic activities on the private market are discussed. The article's third part covers general organizational and budgetary requirements for the administration's contribution to budget consolidation. Arguments against the concept of a “new public management” are also analyzed. Towards the end of the essay, the significance of an adequate “human resource management” is emphasized. The author also stresses that citizens – who are expected to bear a higher load today in the interest of future generations – should be included directly into the process of consolidating public finances.