09:30 - 11:10
P6-S141
Room: -1.A.06
Chair/s:
Mads Andreas Elkjær
Discussant/s:
David Hope
(PETAX) Releasing the Brake? The Covid-19 Pandemic, Public Attitudes, and the Schuldenbremse
P6-S141-2
Presented by: Irene Germani
Irene Germani
King's College London
Despite extensive research on public preferences towards fiscal rules, whether fiscal consolidation occurs because of or despite public opinion constraints remains debated. In particular, while voters are often assumed to have pro-cyclical fiscal policy preferences – thereby necessitating independent fiscal rules and oversight bodies - it is unclear how public attitudes towards sound fiscal finances evolve during economic downturns when fiscal rules are unlikely to be met, such as during the Covid-19 pandemic. This study examines the impact of the pandemic on public attitudes towards Germany’s debt brake policy (Schuldenbremse), which imposes strict limits on government borrowing. Using data from the German Internet Panel (GIP), the study applies an Unexpected Event during Survey Design methodology alongside a Difference-in-Differences estimation approach to analyse changes in public opinion following Chancellor Angela Merkel’s announcement of federal lockdown measures to curb the spread of the virus. As the health situation deteriorated, it became clear that the state had to step in to sustain the economy, hence increasing government spending. Results indicate no significant immediate shift in the evaluation of the Schuldenbremse following the lockdown announcement. However, the findings suggest that public expectations regarding state-level compliance with the fiscal rule worsened over time, with attitudes towards fiscal rules not necessarily hinging on their feasibility. The results contribute to the understanding of public attitudes towards public debt and fiscal consolidation, offering key insights into the post-pandemic discourse on fiscal rules in Germany and beyond.
Keywords: political economy, fiscal policy, debt, schuldenbremse

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