ANALYSIS OF THE CURRENT STATE OF THE FINANCIAL AND BUDGETARY SYSTEM OF GERMANY

Abstract

This article presents a comprehensive analysis of the contemporary financial and budgetary system in Germany. In today's global economy, a nation's economic development significantly influences its position on the international stage, emphasizing the crucial role of effective budgetary regulation. The construction of a nation's budget system dictates the productivity of its national economy, its external relations, and the welfare of its populace. The authors highlight a stated objective of the German government: to enhance the country's budget management by prioritizing goals and outcomes, thereby strengthening performance-based budgeting. To attain this objective, the government employs existing goal-oriented budgeting mechanisms, including performance criteria, subsidy policy directives, and expenditure reviews. Furthermore, the article identifies two defining characteristics of Germany's financial system: its prominent banking-based financial model; the substantial presence of state-owned and cooperative banks, primarily oriented toward non-profit objectives. The year 2023 witnessed a state budget deficit in Germany, coinciding with a notable surge in public expenditures, reaching the highest levels observed from 1991 to 2023. Concurrently, state revenues experienced an upsurge, notably driven by increased tax revenues. Taxation emerges as the principal and paramount revenue stream for the nation's treasury. The forthcoming 2024 budget entails reductions in expenditures across all non-defence departments. This strategic adjustment underscores the government's fiscal priorities and objectives. Upon conducting a comprehensive analysis, it is deduced that while the German budget system demonstrates efficacy and favourable outcomes, akin to other nations, it grapples with inherent challenges and avenues for future development. In summary, the German budget system is intricately structured to align with the government's overarching policy of the social market economy.