The core and auxiliary budgets of municipalities and municipal associations in Germany recorded a financing deficit of €31.9 billion in 2025. According to preliminary results from the quarterly cash‑flow statistics released by the Federal Statistical Office (Destatis) on Wednesday, this was the largest municipal deficit since German reunification in 1990, exceeding the 2024 record of €24.8 billion by an additional €7.1 billion.
In 2025, 7.5 percent of expenditures were not covered by regular revenues and increasingly had to be financed through borrowing. The quarterly debt statistics for 30 September 2025 showed a 16.5 percent rise in municipal cash‑credit debt compared with the year before.
The deficit is mainly due to the core municipal budgets: with €29.4 billion, it was €5.1 billion larger than in 2024. The deficit of auxiliary budgets quadrupled to €2.5 billion in 2025. Auxiliary budgets comprise funds, institutions and companies under municipal ownership that receive most of their financing from municipal grants. Rising deficits therefore mean higher grant needs from core budgets to cover auxiliary costs.
Deficits grew because spending outpaced revenue again. Adjusted expenditures for core and auxiliary budgets rose 5.6 percent, or €22.4 billion, to €423.3 billion in 2025. Personnel costs increased 6.8 percent to €113.4 billion, exceeding the overall trend. This jump reflects wage increases for federal and municipal employees in April 2025 and an expanding workforce. Operating material expenses grew 3.9 percent to €99.1 billion, less than previous years.
Social welfare spending reached €90.0 billion in 2025, a rise of 5.9 percent. Largest increases were in areas predominantly funded by municipalities rather than the federal government or states: spending on integration assistance under SGB IX rose by €2.5 billion (11.2 percent) to €25.2 billion, and expenditures for child and youth services under SGB VIII increased by €1.6 billion (8.8 percent) to €20.0 billion. In contrast, spending on asylum seekers under the Asylum Seekers Benefits Act fell sharply by 10.9 percent to €3.4 billion.
Capital investment expenses totaled €53.9 billion in 2025, up 3.5 percent from the previous year, after higher growth of 12.5 percent in 2024 and 11.9 percent in 2023. Construction‑related costs increased by 4.3 percent to €38.0 billion.
Adjusted revenue for core and auxiliary municipal budgets reached €391.4 billion in 2025, 4.1 percent (or €15.3 billion) higher than in 2024. Net tax revenues grew 3.4 percent to €136.5 billion, driven largely by a 7.5 percent jump in municipal shares of income tax. Contributions to value‑added tax rose 4.3 percent, while net trade‑tax income increased by 1.0 percent. In the year the property‑tax reform took effect, total receipts from property taxes across all municipalities (excluding city‑states) remained unchanged at €14.5 billion.
