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Carry-over:
Section 19 of the Federal Budget Code allows for appropriated funds from
one year to be carried over for use for the same purpose in the following year, subject to
conditions. The main condition is that the carryover must be justified in each case by an
objective requirement to do so (e.g. a legal or contractual obligation): in practice this means
that the carryover facility is not a tool routinely or arbitrarily available for budget managers.
Investment expenditures (and expenditure from earmarked revenues) are automatically
eligible for such carry-over; other types of expenditure may be declared eligible “if this
promotes their efficient and economic use”. In practice, the latter procedure is occasionally
followed for current programme expenditure, although there is some flexibility allowed
with respect to administrative expenditure.
A distinctive feature of Germany’s approach to carry-over is that any such expenditure
in the second year must be explicitly financed through savings in other areas of the
departmental budget. This approach ensures that carry-over does not entail any adverse
impact on budgetary plans and the public finances, and it requires departmental budget
managers to prioritise within their overall allocations and to pay special attention to timely
budget execution. On the other hand, the incentives for managers to realise savings and
efficiencies in budget execution would appear limited under this model compared to the
experience of other OECD countries which allow departments to retain the benefits of
year-end savings for carry-over purposes, without the requirement to “cover the use” of such
funds through offsetting revenue or savings measures.
2. Conduct of fiscal policy – National and sub-national aspects
2.1. Overview of national fiscal policy
The major budget reforms of 1967-71 included a strong macroeconomic dimension,
recognising the role of annual budget policy in promoting broader aims of fiscal and

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BUDGET REVIEW: GERMANY
OECD JOURNAL ON BUDGETING – VOLUME 2014/2 © OECD 2015
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economic management. In this context, the budget-related articles of the Basic Law were
revised, enshrining the “golden rule” tradition (see Box 4 below) and providing for the
principle of “overall budgetary equilibrium”, consistent with price stability, high employment
and economic growth, through balanced fiscal policy over the economic cycle; and a
number of federal laws were enacted in support of these objectives.
In particular, the 
Act to Promote Stability & Growth
of 1967 provided that surplus
revenues arising during periods of above-trend growth (“in the case of an extension in
demand exceeding economic capacity”) should go towards paying off national debt, or
towards accumulation of a counter-cyclical reserve fund. This reserve fund was to be
Box 4.