Stability Council Act

Act on the Establishment of a Stability Council and on the Avoidance of Budgetary Emergencies (Stability Council Act)
(Stability Council Act of 10 August 2009 (Federal Law Gazette I, p. 2702), last amended by Article 3 of the Act of 4 December 2022 (Federal Law Gazette I, p. 2143))

Section 1 – Stability Council

(1) The Federation and the Länder must form a Stability Council with the aim of avoiding budgetary emergencies. The Stability Council must consist of:

1. the Federal Minister of Finance,
2. the Länder ministers responsible for finance,
3. the Federal Minister for Economic Affairs and Climate Action.

The Stability Council must be established within the structure of the federal government.

(2) The Stability Council must be co-chaired by the Federal Minister of Finance and the chair of the Länder Finance Minister Conference.

(3) The Stability Council must meet as required, but at least twice a year. The meetings must be confidential and not public.

(4) To be passed, the decisions of the Stability Council require the vote of the Federation and a majority of two-thirds of the Länder. The vote of the Federation must be cast by the Federal Minister of Finance. When a vote is taken on a decision affecting an individual Land, that Land is not entitled to vote. Notwithstanding sentence 1, decisions affecting the Federation require a majority of two-thirds of all voting members.

(5) The Stability Council must adopt its own rules of procedure. These must also include rules for representation in the event that members are unable to attend.

(6) To support the tasks of the Stability Council, a secretariat must be established comprising one representative from the Federal Ministry of Finance and one representative appointed by the Länder Finance Minister Conference.

Section 2 – Tasks of the Stability Council

(1) The tasks of the Stability Council are

1. ongoing surveillance of the budgets of the Federation and the Länder and implementation of the budget adjustment procedure,
2. surveillance of the Federation’s and each individual Land’s compliance with the debt rule set out in Article 109 (3) of the Basic Law, and
3. surveillance of compliance with the upper limit for the general government structural deficit pursuant to section 51 (2) of the Budgetary Principles Act.

Further tasks may be assigned to the Stability Council by law.

(2) The Stability Council must adopt a decision on the results of each surveillance task.

Section 3 – Ongoing budgetary surveillance

(1) The Stability Council must carry out surveillance of the current state and the development of the budgets of the Federation and Länder. For this purpose, it must define suitable indicators based on data relating to the current budgetary situation and fiscal planning, as well as a forecast of the medium-term budgetary trend based on standardised assumptions. Together, the indicators and the forecast form the system of analysis for ongoing budgetary surveillance.

(2) The Stability Council must consult annually on the budgetary situation of the Federation and each individual Land on the basis of a report from the respective entity, which should contain information about the system of analysis pursuant to subsection (1) and the results regarding compliance with federal and Land debt rules.

Section 4 – Review of an impending budgetary emergency

(1) The Stability Council must adopt threshold values for the individual indicators pursuant to section 3 (1) that may indicate an impending budgetary emergency if exceeded. Different threshold values must be set for the Federation than for the Länder.

(2) The Stability Council must initiate a review to establish whether the Federation or a particular Land faces an impending budgetary emergency if

1. as part of general budgetary surveillance, the Federation or a Land indicates that the budget for which it is responsible faces an impending emergency, or
2. the Federation or a Land exceeds the threshold values pursuant to subsection (1) for a majority of the indicators pursuant to section 3 (1), or
3. the forecast for the Federation or a Land pursuant to section 3 (1) predicts such a trend. In this case, the review may be waived if the results of the forecast have already been the subject of a review and have not changed significantly since then.

(3) The review must take full account of all relevant areas of the affected budget. The Federation or the Land is obliged to provide the information required for this review..

(4) On the basis of the results of the review pursuant to subsection (3), the Stability Council must decide whether the Federation or the relevant Land is facing an impending budgetary emergency.

Section 5 – Budget adjustment procedure

(1) If the Stability Council determines pursuant to section 4 (4) that the Federation or a Land is facing an impending budgetary emergency, it must agree on an adjustment programme with the affected entity. The Federation or the Land must submit proposals for this.

(2) The adjustment programme and its implementation have the aim of improving the budgetary situation of the affected entity in such a way that the result of the ongoing budgetary surveillance pursuant to section 3 for the affected Land or the Federation will cease to indicate an impending budgetary emergency in the foreseeable future.

(3) To achieve the overarching adjustment objective pursuant to subsection (2), the adjustment programme must define annual target values that are tailored to the Land in question or the Federation and which relate to individual or multiple indicators or to the forecast of the medium-term budgetary trend pursuant to section 3 (1), and must also define adjustment measures tailored to these target values.

(4) The respective duration of the adjustment programme for the Federation or the Land must be at least two years. If the ongoing budgetary surveillance no longer finds any indications of an impending budgetary emergency, the adjustment procedure may be terminated early. If the budgetary surveillance finds indications before the end of the agreed adjustment programme that the impending budgetary emergency will continue, the adjustment programme may be extended by agreement between the Stability Council and the Federation or the Land.

(5) The Federation or the Land is responsible for implementing the agreed adjustment programme and must report to the Stability Council at least once a year. If the requirements of the adjustment programme are not met, the Stability Council must review, in consultation with the Federation or Land, whether further measures are needed in order to achieve the target values.

(6) If the Federation or Land does not adequately implement the adjustment programme, the Stability Council must adopt a demand for enhanced budget consolidation. No later than one year after this demand has been made, the Stability Council must review whether the Federation or the Land has taken the necessary budget consolidation measures. If the necessary measures have not been taken, the Stability Council must again demand that the Federation or the Land intensify its budget consolidation efforts.

Section 6 – Surveillance of compliance with the constitutional debt rule

(1) The Stability Council must carry out surveillance of the Federation’s and each individual Land’s compliance with the debt rule set out in Article 109 paragraph 3 of the Basic Law, for the previous, current and following year.

(2) The Stability Council must annually review the results, determined by each entity, of an analysis system coordinated between the Federation and the Länder that follows the requirements and procedures for compliance with budgetary discipline as contained in legislation based on the Treaty on the Functioning of the European Union. A standardised cyclical adjustment method must be used as a basis.

Section 7 – Surveillance of compliance with the upper limit for the general government structural deficit pursuant to section 51 (2) of the Budgetary Principles Act

(1) The Stability Council must twice annually review compliance with the upper limit for the general government structural deficit pursuant to section 51 (2) of the Budgetary Principles Act for the current year and the four subsequent years, on the basis of an estimate of the general government balance.

(2) If the review leads to the conclusion that the upper limit for the general government structural deficit will be exceeded, and if this does not constitute a permissible deviation pursuant to section 51 (2) sentence 2 of the Budgetary Principles Act, the Stability Council must recommend suitable measures for eliminating the excessive deficit. The European Council’s recommendations pursuant to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (OJ L 209, 2.8.1997, p. 1), last amended by Regulation (EU) No 1175/2011 (OJ L 306, 23.11.2011, p. 12), must be taken into account in this regard. The recommendations adopted by the Stability Council must be submitted to the federal government and the Länder governments to be forwarded to their respective parliaments.

(3) If no decision is made by the Stability Council to issue a recommendation pursuant to subsection (2), the chairs of the Stability Council must submit to the federal government and the Länder governments a report outlining the results of the review and the measures discussed by the Stability Council, to be forwarded to their respective parliaments.

Section 8 – Independent advisory board to the Stability Council

(1) An independent advisory board must be established to support the Stability Council in its surveillance of compliance with the upper limit for the general government structural deficit pursuant to section 51 (2) of the Budgetary Principles Act. The advisory board must adopt its own rules of procedure by a majority of two-thirds of its members. The Federation and the Länder must each pay half of the costs of the advisory board.

(2) The advisory board’s members must include: one representative each from the Deutsche Bundesbank and the German Council of Economic Experts, one representative from the research institutes involved in preparing the Joint Economic Forecast, four experts appointed by the Federation and Länder, which must each appoint two experts for a period of five years via their representatives on the Stability Council, and two experts appointed by the national associations of local authorities and the national organisations of the social security funds, which must each appoint one expert for a period of five years.

(3) The advisory board must issue a statement on compliance with the upper limit for the general government structural deficit pursuant to section 51 (2) of the Budgetary Principles Act. The chair of the advisory board must participate in the Stability Council’s consultations in this respect. If the advisory board reaches the conclusion that the upper limit has been exceeded, and if this does not constitute a permissible deviation pursuant to section 51 (2) sentence 2 of the Budgetary Principles Act, it must recommend suitable measures for eliminating the excessive deficit. The advisory board’s statement and recommendations must be attached to the report pursuant to section 7 (3).

(4) The Stability Council must publish the statements and recommendations issued by the advisory board.

Section 9 – Publication of decisions and provision of information to the parliaments

(1) The Stability Council must publish its decisions pursuant to section 2 (2) and the consultation documents on which they are based.

(2) The federal government and the Länder governments must submit the Stability Council’s decisions and the consultation documents on which they are based, as well as the advisory board’s statements pursuant to section 8 (3) sentence 1, to their respective parliaments.