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Arc 1 – Towards the annual “Key Figures Decision” and Stability Programme.
As a euro
area country, Germany is obliged to prepare a Stability Programme by mid-April each year,
showing the medium-term aspects of economic and fiscal policy which are used as a basis
of EU-wide budgetary surveillance. The starting-point for this annual process can be traced
back to the November of the previous year when the German Council of Economic Experts
presents its wide-ranging economic report, including economic and fiscal forecasts. The
Council is an independent statutory body and its report is not directly a part of the
government’s budget preparation process. However, the government is obliged to respond
formally to the Council’s report, and it does so in the Annual Economic Report which is
published by the Federal Ministry of Economics
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in late January each year, and which
includes the government’s official economic forecasts for the year ahead.
On the basis of these official macroeconomic forecasts, the Federal Ministry of Finance
prepares an internal tax revenue forecast (in the subsequent phases of the budget process, this
is replaced by forecasts of the Working Party on Tax Revenue Forecasts – see below). In parallel,
and informed by these analyses, the Federal Ministry of Finance draws together its estimate of
the national budget parameters for the general government sector. These budget estimates are
not merely technical exercises, prepared on the basis of the cost of existing policies, but reflect
the constraints imposed by Germany’s fiscal rules framework (see Section 1.3 below). 
It is in this context that the Federal Ministry of Finance seeks to accommodate policy
pressures and new priorities, as signalled from the political system, within the available
resources. The combination of a strong rules-based fiscal constraint which makes explicit
the ceiling on resources, and the ex-ante phase of deliberating on political priorities, makes
for a distinctive “top-down” style of budgeting in Germany (see also Section 1.3). This
process leads to cabinet agreement on the “key figures” or “benchmark figures” decision,
including indicative expenditure allocations at the federal level, in March. 
The same process which leads to the internal benchmark figures proceeds through to
the preparation of the external (i.e. EU-related) Stability Programme. The forecast budgetary
aggregates arising from this exercise are notified formally to the European Commission by
the end of March as required by EU surveillance rules (this “Maastricht notification” includes
outturn figures for the general government sector – debt and deficit ratios – as well as
projections for the year ahead). Finally, the annual Stability Programme is produced by mid-
April, following the format laid down under EU rules, dealing in particular with public-
finance targets for the following year (i.e. the budget year) and into the medium term.
On the basis of this phase of the budget process, the parameters of the annual budget
for a given year are firmly laid down as early as March/April of the preceding year. The
remainder of that preparation year (i.e. from April to December) is taken up with more
detailed specifications of the allocations for each Ministry, with more limited room for
adjustment and re-allocation.