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1.3.2. Scope for re-allocation during the budget formulation stage
In practical terms, it is notable that the effectiveness of Germany’s top-down approach
to date has been due, at least in part, to the existence of a well-established bureaucratic
mechanism for transitioning from one year’s budget cycle to the next. Provided that the pre-
set course of budgetary policy is aligned with the fiscal constraint (so that the “opportunity
cost” of any alternative allocations is readily apparent), this approach to applying top-down
budgeting can be most effective in keeping public finances on track as in Germany’s case. 
Germany however, does have tools at its disposal to introduce adjustments to the pre-set
allocations when circumstances call for it. To begin with, as outlined above, there is scope in
the initial budget updating phase (December-January) for new priorities to be surfaced and,
if necessary, elevated to political level for decision. However, this scope appears limited to
incremental or one-off policy proposals, and is not designed to accommodate large-scale,

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government-wide reprioritisations. This became apparent in early 2013 when it was
acknowledged that significant additional savings would be required in the 2014 budget, and
that there was a need for a stronger engagement of the political levels of government to
address this. During this event, the State Secretaries of the various government ministries
convened for discussions led by the Federal Ministry of Finance. This proved to be a
productive way of forming a shared understanding of the task to be addressed. A range of
political options were raised and a specific approach was agreed upon including an element
of across-the-board savings together with some more targeted measures.
As regards to across-the-board savings, there is an additional mechanism available to
the government. As a contingency for circumstances in which savings need to be identified
quickly for policy emergencies, the Federal Ministry of Finance has devised a formula,
referred to informally as the “expenditure key”, for levying reductions in an equitable 
pro
rata
manner across all ministries (making allowance, however, for statutorily pre-empted
expenditure, so that reductions are as far as possible exacted from “discretionary” areas of
spending). Such a mechanism was availed of when additional expenditure consolidation
was found to be necessary in 2013 to keep within budget limits and make room for
additional spending priorities.
As effective as this technocratic mechanism proved to be, its use illustrates a more
general point that Germany does not have well-developed mechanisms for prioritising, and
re-prioritising, among its various areas of public expenditure in a routine manner, as is the
case in other OECD countries. Such mechanisms could be particularly useful if, for whatever
reason, the practice of over-pessimistic forecasts, and the associated expectation of
additional resources helping to smooth the annual budgetary process, were discontinued.