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Germany
Fiscal Policy & National Budgets
Tax Policy
Cutting government subsidies could contribute substantially to consolidating the budget in Germany. It would also diminish allocation and incentive distortions in the business sector and in doing so increase overall economic welfare. The authors have thus developed a traffic light system, which we call the Kiel Subsidy Traffic Light, to determine what subsidies could be cut to what extent. The traffic light turns red for subsidies that could be cut completely and indicates that subsidies amounting to a total of over €7.5 billion could be cut. It turns yellow for subsidies that serve economic objectives that are useful and should thus continue to be provided but that could be cut substantially if they were redesigned to be more efficient. These subsidies amount to a total of €19.7 billion.
