Macroeconomic Development : Germany

A market economy, too, can experience undesirable developments. When this happens, the state tries to counter them with open markets and a macroeconomic policy. The aims are stable prices, a high level of employment and a balance of foreign trade under conditions of steady, adequate growth. Unfortunately, it has not always been possible to achieve these simultaneously. The trade unions and employers’ associations also bear some of the responsibility for ensuring that economic development is oriented toward these goals.

The following bodies are involved in the coordination of economic and fiscal policy in the Federal Republic of Germany:

>The Business Cycle Council, consisting of the federal ministers of economics and finance, one member from each state government, and representatives of the municipalities and associations of municipalities. The Deutsche Bundesbank may also take part in the consultations, which take place at least twice a year.

>The similarly composed Financial Planning Council, which has the task of coordinating financial planning at all levels of government. The federal and state governments have to draw up multi-annual plans so that public revenue and expenditure can be geared to the demands and capacities of the national economy.

Government decision-makers have come to rely on the advice of economic experts when formulating economic policy. In addition to the Council of Economic Advisers for the Federal Ministry of Economics and various research institutes, a key institution providing such advice is the Council of Experts on the Assessment of Economic Trends, which was set up in 1963. Comprised of five independent economic experts, this body evaluates overall economic trends and presents concrete recommendations every autumn as a basis for government decision-making and public judgment. Every January, the Federal Government presents to the Bundestag and the Bundesrat an annual economic report which contains a response to the annual assessment of the Council of Experts as well as an outline of economic and financial policy objectives for the current and subsequent years.