According to a study from the Institute of the German Economy (IW), the accumulated debt of the federal government, states, and municipalities has risen by nearly a third since 2016, now exceeding €33,000 per inhabitant.
The federal government accounts for the largest portion of this increase, with its per capita debt rising by almost 45 percent-a jump of over €7,000. Municipalities saw a substantial increase of about 37 percent, while the states experienced a rise of just under four percent. The IW notes that municipal debt would actually be even higher if the states had not absorbed communal debt in recent years, citing examples such as North Rhine-Westphalia, Rhineland-Palatinate, Saarland, and Hesse.
While most areas faced rising costs, only the Saarland and Rhineland-Palatinate have successfully managed to reduce their overall debt. Rhineland-Palatinate saw its debt shrink by approximately eleven percent, and the Saarland reduced its debt by seven percent. Both regions achieved this improvement by significantly increasing property taxes and keeping expansion of public services minimal compared to their peers.
Conversely, Bremen recorded the greatest increase in debt, adding almost €4,000 per inhabitant, followed by Saxony-Anhalt with an increase of €3,200.
IW experts, including Björn Kauder, attribute the escalating debt among municipalities primarily to the federal government’s expansion of childcare programs and the rising costs of social benefits, which the local authorities must cover. Kauder emphasized that if the federal government imposes new responsibilities on municipalities, it must simultaneously ensure the necessary funding is available.
