Germany’s Cities Face Dramatic Financial Crisis, Says Urban Association
According to the German Cities Association, the financial situation of many municipalities is dire. “This year, the municipal budgets are expected to show a record deficit of over 13 billion euros, more than double the amount of last year’s deficit” said Helmut Dedy, the association’s CEO, in an interview with the Mediengruppe Bayern.
The federal government and states have been assigning more tasks to municipalities for decades, without providing a reasonable financial basis. Inflation and rising social expenses are exacerbating the issue. “With the premature elections, additional uncertainties arise” said Dedy. He and his colleagues are unsure if they can rely on the announced federal funding.
Dedy hopes that a solution can still be found for the issue of old debt regulation. “Cities in Saarland, North Rhine-Westphalia, and Rhineland-Palatinate are particularly affected. For them, this is a nearly existential question. They often cannot get out of the debt spiral on their own” said the CEO. “The other federal states have no disadvantages. Municipalities in Bavaria or Baden-Württemberg would not be affected.” However, a debt regulation with federal funding would require a constitutional amendment.
Due to the precarious financial situation of the municipalities, many things are being put to the test locally, added Dedy. “The time of balanced municipal budgets is over.” Although the cities will continue to fulfill their mandatory duties, such as social services, elementary schools, and kindergartens, or health offices, “many cities, which are currently setting their budgets, no longer ask if they can spare on voluntary tasks, but at which ones.