Federal Finance Minister Lars Klingbeil (SPD) is planning a new multi-billion Euro relief package for the federal states and local municipalities. This plan, detailed in a draft law from the Ministry of Finance and reported by Politico, totals around four billion euros through 2029, amounting to roughly one billion euros spread out each year. By introducing this draft, Klingbeil aims to implement agreements made within the coalition contract between the SPD and the CDU/CSU. Previously, there had been some discontent among the states and municipalities regarding the delays in these plans.
The relief measures are structured around three main areas. Firstly, 400 million euros are earmarked for the “donor states” within the federal equalization plan; these states, which include Bavaria, Hesse, Baden-Württemberg, and Hamburg, will receive support, with the draft assuring that the “recipient states” will not be negatively affected.
Secondly, each year, the states are set to receive 250 million euros to assist with measures aimed at alleviating the financial strain on local municipalities that have been accumulating excessive cash loans. Cash loans are intended only to secure short-term liquidity and cannot be used for investments. According to the Ministry of Finance draft, these funds are meant to help ensure the operational capacity of the local governments. Furthermore, over half of this money is expected to flow to North Rhine-Westphalia, which can allocate 164.5 million euros annually to ease the burdens on struggling municipalities. Lower Saxony is set to receive about 23 million euros, while Rhineland-Palatinate is allocated 35.3 million euros for this purpose each year.
The third component concerns supplementary and special pensions for former employees of the GDR state structures, including personnel from the army, people’s police, state security, service departments, or culture. Currently, the costs are shared between the federal government and the states. By 2029, the federal government is slated to cover 60 percent of these expenditures, representing an estimated annual relief of around 350 million euros for the eastern German states.
A spokesperson for the Federal Ministry of Finance declined to comment on specific details of the plans when contacted by the magazine. However, she confirmed, “We continue to stand by the mandate laid out in the coalition agreement to support the states with alleviating municipal legacy debt through 250 million euros annually”. She added that the goal is to present the relevant legislative draft to the cabinet promptly. Minister Klingbeil has repeatedly emphasized that, “We want to relieve the pressure on the municipalities, as that is his priority”.
