As the German Landkreistag warns of a financial collapse of the municipalities, it is clear that the current financial situation of the local authorities is precarious. According to Hans-Günter Henneke, the main executive of the municipal top association, the situation cannot continue for another four years. “We need urgent relief” he told the Handelsblatt, adding that the municipalities require a better tax allocation overall.
The background to this situation is the current financial state of the local authorities, where the reserves in many parts of the districts have been exhausted to 80%. “Without a halt to the growth of expenditures and a strengthening of the municipal revenue base, the collapse of the district budgets is threatened” the Landkreistag is quoted as saying by the Handelsblatt.
Originally, the municipal top associations had estimated a municipal deficit of 13.2 billion euros for 2024, but the actual figure for the first three quarters was 24.9 billion euros, according to Henneke. “These are gigantic numbers that reveal the structural errors” he said.
To improve the situation, Henneke demands a higher percentage of the value-added tax for the municipalities. Currently, cities and municipalities only receive 2.2% of the total value-added tax revenue, with the rest going to the federal and state governments. Henneke stated, “The percentage of the municipalities in the value-added tax must be tripled.”
Additionally, he called for a fundamental reorientation of the social welfare state, which requires a consistent deregulation. “These are big tasks, so no more time can be wasted” Henneke said.