Æ Link to Quality: The influence on the quality of public finances of the above-mentioned institutions stems
above all from the fact that they provide important initiatives for reforms in various fields and draw attention to
areas where things are going wrong. For instance, the various advisory bodies made a substantial contribution to
the discussion on the general direction and detailed design of the structural reform measures that have been
carried out.3. Results and conclusions
In the light of the federal government's reform agenda described above, the structure of public budgets in
Germany is described in the following. On the one hand, the empirical data already indicate successes;
on the other, they reveal a need for further action.
The development of the tax ratio and the Government Expenditure as Percent of GDP are positive
elements from the point of view of quality. The tax ratio has been reduced to a historically low value; the
public-sector share of GDP reached 46.9% in 2004, the lowest level since 1991.
Table 1: Development of the Government Expenditure as Percent of GDP
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000^2 20013 2002 2003 2004
Central, regional, and local authorities^1 27.2 28.0 28.3 27.8 27.9 27.9 27.1 27.0 26.9 26.5 26.2 26.2 26.2 25.7
Social insurance^1 18.0 19.2 19.9 20.0 20.6 21.4 21.2 21.1 21.1 21.1 21.3 21.7 21.9 21.3
Total 46.3 47.2 48.2 47.9 48.1 49.3 48.4 48.0 48.1 47.6 47.5 47.9 48.1 46.9(^1) Direct expenditure (without expenditure on other government levels)
(^2) Without proceeds from the UMTS auction
(^3) From 2001: provisional results; data collected in April 2005
This is also reflected in the functional composition of the public budgets. For instance, expenditure on
general public administration has been cut to a share of 13%. With regard to the economic composition
of public budgets, the reductions in subsidies and interest costs should also be emphasised from the
qualitative point of view.
Table 2: Public expenditure functional classification (COFOG 1), share of total expenditure^34
State as a whole
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
General public administration 14.4 14.0 14.1 13.9 12.2 13.6 13.7 13.9 13.5 8.6^1 13.1 13.0 13.0 13.0
Defence 4.0 3.7 3.3 3.0 2.5 2.7 2.6 2.6 2.6 2.7 2.5 2.5 2.4 2.4
Public order and security 3.2 3.3 3.4 3.4 3.0 3.4 3.4 3.4 3.4 3.6 3.4 3.4 3.3 3.3
Economic affairs 11.5 11.0 10.2 9.5 20.3^2 8.8 8.2 8.3 8.9 9.2 9.0 8.3 8.0 7.7
Environmental protection 2.1 2.3 2.2 2.2 1.7 1.7 1.6 1.5 1.4 1.4 1.2 1.2 1.1 1.1
Housing and municipal facilities 2.1 1.9 1.7 1.8 1.5 1.6 1.8 1.9 2.0 2.3 2.3 2.4 2.4 2.4
Health 12.5 13.1 12.5 12.9 11.4 12.9 12.8 12.8 12.8 13.7 13.1 13.2 13.3 13.0
(^3) In general it has to be seen that because of the distribution of responsibilities in Germany's federal system of
government, a considerable proportion of the expenditure that will become effective in the future is made by the Länder
and local authorities. This applies especially to areas such as education and research, family and children's services,
health, environmental protection and nature conservation. Altogether, future-effective expenditure makes up about 40%
of Länder spending