The German Association of Cities and Municipalities sees hardly any investment opportunities due to the increasingly poor financial situation of the municipalities. “The financial situation of the municipalities in Germany is precarious” said Chief Executive André Berghegger to the “Rheinische Post” (Saturday edition). “The municipalities are steering towards a loss of their ability to act.”
According to his statements, the municipalities’ negative financial balance totaled minus 24.9 billion euros in the third quarter of 2024. This, he said, is another indicator of the fatal financial situation. “This development must be stopped immediately to avoid jeopardizing the municipal self-government and local democracy as a whole” he said.
The reasons for the municipal financial crisis lie mainly in the enormous increases in social expenditures, which are hardly controllable from a municipal perspective. There is no improvement in sight; on the contrary. “Currently, we must assume structural financial deficits of between 15 and 20 billion euros per year for the coming years” said Berghegger. “Given this financial situation, the municipalities are fiscally forced to reduce their investments in the coming years” he warned.
The overall budget deficit has risen to around 108 billion euros in the first three quarters of 2024, according to a report by the Federal Statistical Office in Wiesbaden on Friday. The financing gap of the federal government, states, municipalities, and social security system was 16.1 billion euros higher than in the previous year.