Academic Essay - Budgeting Process (Essay Sample)

Academic Essay-
Budgeting Process
1 Introduction
Budgeting is the important exercise of allocating financial resources to various public sector. Budgeting is also considered as a tool of financial administration CITATION Wor07 \l 1033 (World Bank, 2007). It ensures accountability and transparency of the public fund. It enables the government to plan and manages its financial resources. Every country formulates its national budget every year. There are four distinctive phases involve in the overall budget setting process like; budget preparation, authorization, execution and accountability CITATION Pay12 \l 1033 (Haerifar, 2012). It also involves a series of steps like determine the overall economic targets, revenue and expenditure. The objectives of every national budget are somehow common. The first objective is to set up the fiscal targets and level of expenditure. Likewise, addressing operational efficiency and performance issues, allocating resources and formulating strategies of achieving targeted objectives. The national budget of the country is also the reflection of the fiscal policies of the country and its effectiveness CITATION Rut10 \l 1033 (Carlitz, 2010). In this essay, the budgeting issues of "Germany" has been discussed. Moreover, the essay also explains how the current fiscal and debt crisis of Eurozone affects the budgeting process of Germany.
2 Brief Background of the Current fiscal position of a Euro Zone
The Eurozone is facing acute fiscal and sovereign debt crisis CITATION Mar143 \l 1033 (Esposito, 2014). There many European countries that are fiscally unsustainable and continuously borrowing from other European countries and international monetary funds (IMF) just to avoid defaulting. The three biggest examples are Greece, Ireland and Portugal who are facing high public debt and defaulting risk CITATION Reb111 \l 1033 (Nelson & Mix, 2011). The Eurozone crisis started from Greece in 2009 that turned into severe economic and political crisis. The Eurozone is facing four kinds of crisis. The first is high debt and public debt, deficit in many countries of Europe. The second is a weak banking system. The third is a high unemployment rate and economic crisis in Europe. The last is trade deficits in many countries of the Europe CITATION MRA12 \l 1033 (Anand & Dash, 2012). There are many countries that have high imports and few exports that makes the overall Eurozone crisis severe. The key issue behind the present Eurozone crisis is incompetent policies of former governments and their leaders. The complex policies of European countries to tackle the present crisis are increasing the anxiety in the European market. The crisis had been revealed by the Greek government in 2009, when they announced the former government misreporting the budgets and left the country in acute debt crisis. The fake reporting of the financial position of the country done to gain the confidence of the investors, but after the revelation the fiscal sustainability became vulnerable of many European countries CITATION Jam12 \l 1033 (Haidar, 2012).
There were many countries who took initiatives to tackle such a crisis. Italy and Spain were the two countries who played prominent role in dealing with the Eurozone crisis. At the same time, the efforts were not adequate and they failed to introduce the appropriate policies and measures to solve such a crisis. The financial unsustainably increased and crisis turned into a political crisis. The austerity measures of the European government to handle the crisis received severe backlash from the public. The strong European countries started giving bailout packages to the weaker one, but such a policy didn’t prove successful because the response was very slow CITATION Ard09 \l 1033 (Ardagna, 2009). But recently the European Union in European summit announced the new plan of measures to deal with the Eurozone crisis. The first and foremost feature of the plan is to reform the European banking system by introducing new policies and appoint a single bank over the supervision of the Eurozone CITATION Reb111 \l 1033 (Nelson & Mix, 2011). Similarly, the other measure is to provide the rescue funds to the weak economies like Greece. There are many consequences of the Eurozone fiscal crisis on the global economy. The US economy is also suffering due to Eurozone economic and fiscal crisis because the EU and the US have the largest bilateral trade and investment ties that why the EU and the US both working together to deal the Eurozone fiscal crisis CITATION Pau12 \l 1033 (Belkin, et al., 2012). As far as Germany is concerned, it plays an important role in minimizing the present Euro crisis. Germany is also one of the country, which has affected due to Euro Crisis. There are two schools of thoughts that explain two contradictory views on the impact of the Euro crisis on the German’s economy. One school of thought explains that the Euro crisis has placed too much burden on the Germany’s economy and its taxpayers. Moreover, they also believe that the present austerity measures that are placed on Germany by their European partners to deal with the Euro crisis are not justifiable. On the other hand, some believe that Germany’s government is actually benefiting from the present Euro crisis because such an austerity measure has a positive impact on the gross domestic product and overall economy of the Germany CITATION Cla122 \l 1033 (Broyer & Schneider, 2012). But in reality, The Euro crisis is also impacting the big economy like Germany because it is also facing soft budget constraints and moderate level of fiscal unsustainability. The detailed analysis has been done on the next sections of this essay.
3 Budgeting process of Germany
Budgeting is an important tool of financial administration of a country. Different countries chose different techniques of formulating their budgets like some use zero-based budgeting and some use planning, programming budgeting and so on CITATION Pay12 \l 1033 (Haerifar, 2012). Budgeting in Germany is conducted on the basis of well-developed legal, constitutional and administration framework at the federal level. The budgeting process of Germany has all components of modern budget that is the reason the fiscal performance of Germany is far better than the other European countries even in the current Eurozone crisis. The constitutional and legal framework of Germany gives adequate attention to specification of rules and principles of budgeting process. Some of the significant principles are universality, specificity, timeliness, financial sufficiency and many others. The package prohibition is the significant component of Germany’s budget. The package prohibition ignores all the unrelated items that not related to the budgets. The documentation of the budget includes the detail of financial allocation and programs. Moreover, the budget of Germany also writes down the detailed strategic plan of each program along with its financial allocation budget CITATION Rol14 \l 1033 (Alter & Blöndal, 2014).
* Relationship between Executive and Legislature in Budgeting process of Germany
Executive and legislative both play significant role in the budgeting process in any country. Budget is a tool of financial administration and maintaining accountability in a country. In every democratic nation, budgeting is a system of delegating power and maintains check and balance over the financial matters of the country that’s why effective budgeting is a pre-requisite of ensuring the accountability. Government plays important role in the process of establishing and formulating the budget CITATION MAN05 \l 1033 (MANSFELDOVÁ, 2005). In the government, both executives and legislature act as the arm if, they both work in harmony during the budgeting process. The equal distribution of power between the legislature and executive of preparing the budget is a vital component of a democratic country. In the case of Germany, the participation of both executive and legislature is prominent in every phase of formulating the budget. The Germany budgeting process includes three steps. The first step is information, the second is consultation and third and last one is accountability. In the first step information, executives play the prominent role in supplying information and collecting information about the previous budgets and their effects from the general public. The main focus of the first step is to inform the general public of Germany about the budgeting process and urge them to participate in the budgeting process. The second step, which is consultation. In consultation, both executive and legislature have important roles and influence at this step. The major decisions are taken in this step about the allocation of financial resources to different sectors CITATION Ian10 \l 1033 (Lienert, 2010).
All the members of executives and legislatures involve in this step and formulate the budget. In the last step which is accountability, legislature plays a dominant role than executives. The accountability tools that can use by Germany’s executive to ensure the accountability of the budgeting process is to check and balance, appropriation and re-appropriation and formulation of laws and policies regarding accountability. On the other hand, the legislature can call the corrupt leaders under the dock that are responsible for wasting the financial resources. The most important difference between the budgeting process in Germany and other countries is its participatory process. All the legislature and executive are equally responsible for all financial matters. On all the level both executives and legislature members take a decision on the consultation basis that is the reason Germany has still strong economy despite of the acute Eurozone crisis CITA...