The German federal government has introduced the State and Municipal Relief Act (LKEG). According to the Federal Ministry of Finance, this legislation is set to provide additional financial relief to the states, ranging from one billion euros per year between 2026 and 2029. The primary goals of this measure are to improve the financial standing of local governments and boost investments at the regional level.
Federal Finance Minister Lars Klingbeil (SPD) stated that the measure will strengthen the operational capacity of municipalities and ensure that the agreements made within the coalition treaty are implemented fully. He emphasized that, alongside the 100 billion euros from the federal investment package going to the states and municipalities, the message is clear: significant investment can now take place. These funds must be directed towards local investments, specifically in modern infrastructure, quality education, digitalization, and healthcare.
Under the terms of the act, financially weaker states will receive yearly support of 250 million euros. Furthermore, the eastern German states will be relieved of an additional 350 million euros annually to help manage former GDR supplementary support systems. Financially stronger states, meanwhile, will receive a reduction in the financial equalisation paid to them amounting to 400 million euros per year. These reliefs are scheduled to become effective starting in 2026.
