The German federal cabinet approved draft legislation on Wednesday concerning the financing of infrastructure investments for states and municipalities. Alongside this, a draft law addressing the allocation of new “structural debt leeway” to the states and the inclusion of the Stability Council in the updated EU budgetary surveillance system were also adopted, according to the Ministry of Finance.
The first legislative proposal aims to implement the 100 billion euro portion of the federal special fund earmarked for investments by states and municipalities. The Ministry stated this will enable “massive investments on the ground in modernization and future viability.
The second draft law ensures that the states will have the same structural debt leeway as the federal government within the framework of the debt brake, granting them a significantly broader budgetary scope going forward.
Federal Finance Minister Lars Klingbeil (SPD) commented, “Today, the cabinet has initiated the regulations that will make 100 billion euros available to states and municipalities for on-site investments. This directly strengthens the capacity for action of states and municipalities.
The distribution of the 100 billion euros will follow the agreement reached by the Chancellor and state premiers in Königstein, based on the Königsteiner Schlüssel (a formula for distributing federal funds). Investment measures can be financed provided they do not commence before January 1, 2025. Under the proposed law, approvals for measures can be granted until the end of 2036.