The German federal cabinet is expected to approve a draft bill on the assumption of municipal old debts by the end of the coming week. The bill will then be debated in the Bundestag and the Bundesrat in the final sitting week of this legislative period, according to Sarah Ryglewski, the state minister at the Chancellery, in an interview with the “Rheinische Post” (Friday edition).
“We aim to approve the draft bill by a circular procedure in the cabinet by the end of the coming week, with the goal of debating it in the Bundestag’s plenary session in the last week of January, so that the process could be completed before the federal election” Ryglewski said.
Federal Finance Minister Jörg Kukies (SPD) recently presented a draft bill that proposes an amendment to the German Constitution. The amendment requires the approval of the Union, as changes to the constitution can only be made with a two-thirds majority in both the Bundestag and the Bundesrat. The assumption of old debts by the federal government is currently excluded by the constitution, as the states are responsible for their municipalities. “We want to create the possibility in the constitution to enable the federal government to take over half of the old debts of municipalities in a federal state that is overindebted, with the states taking over the other half. Each state can decide for itself whether it wants to use this option” the state minister said.
The affected states would take over the other half of the debts. “We have decided to present this draft bill now because there is a risk that a future government might no longer have a two-thirds majority to amend the constitution after the election. Therefore, we are currently holding talks with the states and with the Union and the FDP on all levels” Ryglewski said.
“The constitutional amendment would not bind a future federal government. It would only create the possibility for it to relieve overindebted municipalities” the state minister added.
Assuming the old debts by the federal government would not affect the overall federal debt brake, as only debts would be restructured, not new ones created. “The old debts of the municipalities amount to about 31 billion euros, of which 15.5 billion would be for the federal government. For this sum, the federal government would then have to pay interest and amortization, which would, of course, be relevant for the budget” Ryglewski said.