Federal Finance Minister Lars Klingbeil (SPD) is planning a new multi-billion Euro support package for states and local municipalities. According to a draft law from the Ministry of Finance, as reported by the news magazine Politico, these planned reliefs total approximately four billion Euros up to and including 2029, equating to about one billion Euros per year. This draft implements agreements outlined in the coalition agreement between the Union and the SPD. Recently, there had been some dissatisfaction among the states and municipalities regarding delays in the plans.
The support is intended to address three specific areas. Firstly, 400 million Euros is earmarked for the “giving states” within the state finance equalization system. Historically, this involved states like Bavaria, Hesse, Baden-Württemberg, and Hamburg, and the draft does not disadvantage the “receiving states”.
Secondly, the states will receive annual support of 250 million Euros to assist with measures aimed at alleviating the burden of excessive treasury loans in local municipalities. These treasury loans are used to ensure short-term liquidity but cannot be used for investments. The Ministry of Finance draft states that these funds “should contribute to securing the operational capacity of the municipalities”. According to the document, over half of these funds are set to flow to North Rhine-Westphalia, with the state government in Düsseldorf able to plan 164.5 million Euros annually for supporting struggling municipalities. Rhineland-Palatinate is slated to receive 35.3 million Euros per year, and Lower Saxony approximately 23 million Euros for this purpose.
The third element of the package concerns supplementary and special pension provisions for former East German state employees, drawn from sectors such as the army, Volkspolizei, State Security, civil service, or culture. Currently, the responsibilities for these costs are shared between the federal government and the states. Until 2029, the federal government will cover 60 percent of the expenses, representing a relief for the East German states of about 350 million Euros annually.
A spokesperson for the Federal Ministry of Finance declined to comment on the details of the plans when reached by the magazine. She affirmed, “We remain committed to the mandate established in the coalition agreement, which is to support the states with the relief of municipal legacy debts through 250 million Euros annually”. She added that the goal is to submit the corresponding legal draft to the cabinet promptly. Minister Klingbeil has repeatedly made it clear: “We want to relieve the municipalities more; that is his priority”.