The German federal cabinet is expected to approve a draft bill on the assumption of municipal old debts by the end of next week. The Bundestag and the Bundesrat are then set to discuss the proposal, according to Sarah Ryglewski, the state minister at the Chancellery, in an interview with the “Rheinische Post” (Friday edition).
“We aim to pass the draft bill by a mail vote in the cabinet by the end of next week, with the goal of debating it in the Bundestag’s plenary session in the last week of January, potentially before the federal election” Ryglewski said.
Finance Minister Jörg Kukies (SPD) recently presented a draft bill that involves a constitutional amendment. The federal government needs the approval of the Union, as changes to the constitution require a two-thirds majority in both houses. The assumption of old debts by the federal government is currently excluded by the constitution, as the states are responsible for their municipalities. “We want to create the possibility in the constitution for the federal government to take on half of the old debts of over-indebted municipalities in a federal state, with each state able to decide whether to use this option” the state minister said.
The affected states would take on the other half of the debts. “We have decided to present this draft bill now because there is a risk that, after the election, the democratic parties might no longer have a two-thirds majority. Therefore, negotiations are taking place at all levels with the states and the Union and FDP” Ryglewski said.
“The constitutional amendment would not bind a future federal government. It would only create the possibility for it to alleviate the over-indebted municipalities” the state minister added.
Assuming the old debts by the federal government would not affect the overall federal debt brake, as only debts would be restructured. “The total old debts of the municipalities amount to approximately 31 billion euros, with 15.5 billion for the federal government. For this sum, the federal government would then have to pay interest and principal, which would, of course, be relevant to the budget” Ryglewski said.