Long before U.S. bank chiefs like Jamie Dimon were warning about the consequences of a debt-related cliff edge, the famously prudent German government was erecting statues showing their commitment to a balanced budget.
But all things must pass. The same goes for Germany’s ironclad fiscal blockade and the big black zero that was its mascot.
Germany has quietly removed a large zero-shaped statue that stood proudly in Stuttgart signifying the country’s commitment to a balanced budget, the Financial Times reported. The statue was introduced in 2014 by the state finance ministry of Baden-Württemberg to celebrate successive balanced budgets over several years.
Speaking to the Financial Times, the current Baden-Württemberg finance minister, Green politician Danyal Bayaz, said when he took the post in 2021 the sign felt outdated. He tried first to paint the zero green, before removing it entirely.
Leaving future generations with no debt but a “broke planet and a broken educational system is a bad deal for them,” Bayaz said.
“That’s why I didn’t like the symbol much.”
Stuttgart’s zero wasn’t the only symbol in the country celebrating fiscal responsibility. Indeed, Germany’s post-reunification tagline as the “Sick Man of Europe” inspired several cities to create monuments to smashing their debts.
In Berlin, a digital debt clock was erected in 1997 that demonstrated the country’s shortfall. In 2018, the clock began to turn forward for the first time, indicating Germany was shedding some of its debt.
The German town of Langenfeld, meanwhile, erected its own clock in 1997 that would track the country’s debt as an incentive to bring the figure down. In 2007, Dusseldorf pressed start on a clock to celebrate becoming debt-free.
The removal of the black zero is indicative of a new phase in Germany’s macreconomic policy, one characterized by spending at all costs to arrest two successive years of GDP declines and industrial stagnation.
Germany’s new relationship with debt
Germany’s obsession with debt marked it out among Western countries around the turn of the century. Germany introduced a “debt brake” in 2009 as the world reeled from a global recession set off by the financial crisis. The debt brake restricted annual budget deficits to 0.35% of GDP.
Because of Germany’s export-oriented economy, the country quickly emerged out of recession as it shipped its goods to insulated Chinese consumers.
As many Eurozone members fell into a debt crisis, Germany’s commitment to surpluses proved popular with German citizens. The same couldn’t always be said for indebted countries, namely Greece, who were frustrated in their attempts to spend their way out of a recession by Germany’s influence over the Eurozone.
In Germany, too, the debt brake eventually began to receive criticism as the country flirted with recession in 2019. Those opposed to the fiscal rule felt that Germany had squandered years of sound finances that provided the opportunity for reinvestment and innovation.
That proved a teaser for the turmoil of the 2020s. The Covid-19 pandemic disrupted supply chains, while Russia’s invasion of Ukraine and ensuing sanctions cut Germany off from cheap oil and gas vital for its industry. An additional falloff in demand in a crucial export market of China exacerbated issues for Germany’s biggest companies, particularly for its carmakers.
All have combined to soften the German perception of debt. The newly formed German government, led by Friedrich Merz, agreed in March to partially scrap the debt brake, excluding military spending from the 0.35% measure. This relaxation, combined with a bumper investment pledge, saw Germany commit up to $1.3 trillion in spending.
