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2. Germany’s “debt brake’ rule provides a clear budget constraint which forms the
backdrop to the conduct of fiscal policy.
The rule, which was introduced into the Basic Law
in 2009, requires that the federation and the 
Länder
run their public finances in balance,
over the course of the economic cycle, subject to limited scope for borrowing at the federal
level and in response to exceptional events; and that deviations from this position be
logged and corrected through a control account. 
3. Since 2010, the annual budget cycle has been adapted to reflect the budget
constraint, and also to allow for political steering of the resource-allocation process from
the outset, resulting in a distinctive form of “top-down budgeting”.
In effect, the draft
budget figures carried forward from the previous annual cycle, and which have already
been designed to meet the budget constraint, form a clear starting point for setting the
budget allocations in each line ministry. Budget preparations for any year 
y
get underway
in November/December of year 
y-2
(i.e. the calendar year two years before the budget year),
as line ministries inform the Federal Ministry of Finance of technical updates to their
baseline figures, and of the new issues or priorities that they wish to see reflected in their
final budget allocations. After engagement at political level, including minister/cabinet
level in the case of contentious or sensitive issues, a “key figures decision’ is adopted by
cabinet the following March (i.e. of year 
y-1
) with overall allocations determined for each
ministry for the budget year, and for the following three years. 
4. The annual budget cycle is organised around three distinct phases or “arcs”:
i) the
preparation of the key figures decision in March, which also leads to the annual Stability
Programme in April as required under EU rules; ii) the preparation of the draft federal
budget and five-year Financial Plan, which are submitted to the federal parliament in
August; and iii) the consideration and adoption of the budget by the parliament, with a