In Germany, the federal government and the 16 federal states are obliged to balance their books and are practically prohibited from taking out extra loans. No other G7 country has such strict limits on new borrowing. The rules are enshrined in the Basic Law, i.e. the German constitution, and apply — with minor differences — both at the federal level and in the 16 states (known as Länder).

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Article 109 of the Basic Law, paragraph 3, states: "The budgets of the Federation and the Länder shall, in principle, be balanced without revenue from credits." This means that the state may only spend as much money as it takes in, primarily from taxes and levies. This requirement is known colloquially as the "debt brake."

The requirement was introduced in 2009 under then Chancellor Angela Merkel, a Christian Democrat (CDU), and her Finance Minister Peer Steinbrück, a Social Democrat (SPD). It was introduced in the midst of a global financial and economic crisis in which there was........

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