Abstract

A longer-term perspective reveals the historical exhaustion of the financial resources of the democratic interventionist state of the postwar period. German politics present and future is shaped by a deep crisis of public finance. Its current expression is an apparently insurmountable conflict between four equally urgent political objectives: paying for social security by general taxes, rather than payroll taxes, to lower labor costs; consolidating public budgets and reducing the public debt; cutting taxes on mobile capital; and increasing public investment in response to new social problems and changing economic conditions. Analysis of the fiscal problems of the German state casts new light on the turbulences of German politics since the Schröder government's first term.