The fiscal deficit for the core and extra budgets of municipalities and local associations (excluding city-states) in Germany stood at €20.1 billion in the first half of 2026. According to provisional data released by the Federal Statistical Office (Destatis) on Thursday, the municipal fiscal deficit has remained at a record level compared to the same period last year. Notably, the deficit in the first half of 2025 was also €20.1 billion, making it the highest first-half deficit recorded since German reunification in 1990.
The increase in the deficit for the first half of 2026 is primarily attributable to the core municipal budgets, where expenditures exceeded revenues by €20.0 billion. Conversely, the extra budgets registered a smaller deficit of €0.1 billion during the same period.
Cleaned expenditures across both core and extra budgets for the first half of 2026 amounted to €204.1 billion, marking a 2.7% increase compared to the first half of 2025 (€5.4 billion increase). This is a moderation from the sharper 6.9% rise observed in the previous year’s period. Cleaned revenues increased by 3.0% or €5.3 billion to reach €184.0 billion, following a 6.0% increase in the prior year.
Spending categories grew relatively evenly: personnel costs rose by 5.2% to €54.7 billion; current operational expenses increased by 4.0% to €49.5 billion; social benefits grew by 3.9% to €46.3 billion; and dedicated grants to the non-public sector (such as funding for daycare centers and other non-profit institutions) climbed by 5.2% to €25.4 billion. However, municipal interest expenses saw a significantly higher growth rate at +13.1%, reaching €2.4 billion. In contrast, capital investments fell by 4.5% to €21.7 billion, and construction projects decreased by 2.4% to €15.5 billion.
Regarding revenues, the net tax income for municipalities saw only a slight increase of 0.9% in the first half of 2026, reaching €57.3 billion. Commercial tax revenues (net), however, decreased by 2.0% to €30.8 billion. This decline was offset by growth in local allocations from income tax (+0.5% to €14.7 billion), property taxes (+4.1% to €7.5 billion), and the municipal share of VAT, which surged by 26.9% to €3.3 billion.
Key allocations to local governments increased by 0.3% year-over-year, totaling €30.3 billion. Dedicated grants from the states rose by 3.4% to €19.4 billion, while investment grants from the states saw an 8.7% increase, totaling €5.7 billion. Finally, revenues from administrative and user fees climbed by 5.7% to €26.5 billion. Statisticians noted that this growth was stronger in the extra budgets (+8.3%, reaching €13.4 billion) than in the core budgets (+3.2%, reaching €13.1 billion).
