Federal Reform under the Grand Coalition

Abstract

This article compares the approaches of the first (1996–69) and second (2005–09) Grand Coalition to the problems of a renewal of Germany's system of intergovernmental fiscal relations. The conditions and challenges were different. The first Grand Coalition was wanted by its partners, and they had a common agenda, the second one was unwanted and forced by electoral circumstances. It lacked a common agenda. The fiscal reform of 1969 finished finally what the Parliamentary Council had left open in 1949 and followed the path of interlocking federalism. Its general theme was ‘uniformity of living conditions’. The challenges of the second Grand Coalition were different: public debts and budgetary restrictions. In order to cope with these the second Grand Coalition introduced the ‘debt brake’. The debt brake is a part of the change of paradigm of German federalism towards less ‘equality of living conditions’ and can partly be seen as the reversal of the 1969 reform.