German State Leaders Urge Federal Support for Local Governments
Ahead of the minister-presidents’ conference on Wednesday, Mecklenburg-Vorpommern’s Minister-President, Manuela Schwesig, is demanding that the federal government compensate for potential tax losses at the state and municipal levels.
Schwesig, a Social Democratic Party (SPD) politician, told the Rheinische Post that it is a good thing the federal government has passed an emergency program and measures to boost the economy, particularly the possibility of faster depreciation of investments.
However, the key point is that the measures mainly cause tax losses for states and municipalities, which can be a significant burden for local governments. Schwesig emphasized the need for a solution that benefits states and municipalities.
Mecklenburg-Vorpommern has recorded the second-highest growth in Germany last year, but the state still feels the effects of the third recession in the country, Schwesig said.
She also expects the other measures from the emergency package to be implemented quickly, particularly the laws for the implementation of the special fund for infrastructure.
Additionally, Schwesig called for a reduction in the electricity tax, a reduced value-added tax for the hospitality industry and an increase in the commuter allowance.
Meanwhile, Saarland’s Minister-President, Anke Rehlinger, is demanding the introduction of a mandatory basic damage insurance.
Rehlinger told the Rheinische Post that a fair and affordable mandatory insurance is needed to ensure that, after floods, the taxpayer does not always have to bear the cost of damage.
She believes that a model similar to the one in France should be adopted in Germany, with the federal government and states discussing the details and a potential implementation timeline.
Rehlinger also urged a swift definition of the special fund for infrastructure and climate protection, saying that it is a chance for massive investment in Germany and already boosting growth forecasts.
Hesse’s Minister-President, Boris Rhein, is also pushing for more federal support for states and municipalities.
Rhein, a Christian Democratic Union (CDU) politician, told the Rheinische Post that, to preserve the functionality of the federal system, federal laws that have financial consequences for states and municipalities should be automatically compensated by the federal government at least in part.
The principle “who orders, pays” should be more strongly applied, Rhein said, as states and municipalities need sufficient financial leeway to fulfill their tasks in the federal system.
Rhein also called for the participation of states in the planned increase in federal defense spending and for additional funds from the climate and transformation fund to be allocated to states and municipalities in federal programs.
He views the new legislative period as an opportunity for a genuine policy shift, even in the cooperation between the federal government and states.
Rhein added that, if a fair mechanism for compensating for tax losses caused by federal laws is developed, it would spare the need for lengthy negotiations before each federal council and provide for quick relief for citizens and businesses.
The minister-presidents of the states will meet with Federal Chancellor Friedrich Merz on Wednesday, after the originally planned meeting on June 5 had to be rescheduled.