A German government and regional leaders have reached an agreement to discuss potential aid measures following a backlash from the states over the proposed tax package. Chancellor Friedrich Merz has agreed to hold talks with the states to address the expected revenue losses at the federal, state and local levels.
A working group is expected to present a concrete proposal by the end of the week. Merz acknowledged the “Investments Booster” would lead to revenue losses at the federal, state and local levels, stating, “That’s why we need a joint great effort and a united front between the federal states and local governments. We will therefore enter into a structured dialogue in the coming days to ensure a fair federal-state financial relationship in the future.”
The Chancellor has requested the state premiers to pass the tax program in the federal council on July 11. Saxony’s Minister-President Michael Kretschmer emphasized the need to help the German economy get back on its feet, stating, “We are united in the belief that this legislative package can make a contribution.” At the same time, he said, one can tell local authorities that a relief for them will be organized. In addition to the “Investments Booster” a “Deregulation Booster” is also needed, Kretschmer added.
Merz referred to the planned special fund of the federal budget for infrastructure, which will make 100 billion euros available to the states and local authorities. “The legislation is on its way and will be coordinated and agreed upon by the federal government and the states” the Chancellor said.