The Federal Government has introduced the State and Municipal Relief Act (LKEG). According to the Federal Ministry of Finance on Wednesday, this law is set to provide additional financial relief to the states amounting to one billion euros annually between 2026 and 2029. The stated goal of this measure is to improve the financial standing of municipalities and strengthen local investments.
Federal Finance Minister Lars Klingbeil (SPD) stated that this initiative will enhance the operational capacity of local governments and ensure the full implementation of the coalition agreement’s provisions. He emphasized, “In addition to the 100 billion euros from the federal investment package flowing to the states and municipalities, it is clear: massive investment is now possible”. This funding is intended specifically for local investments in areas such as modern infrastructure, education, digitization, and healthcare.
Under the terms of the law, financial assistance is structured in several parts. Financially weaker states will receive support of 250 million euros per year. Furthermore, the eastern German states will be relieved of 350 million euros annually to offset costs associated with the former GDR supplementary provision systems. Additionally, financially stronger states will receive an annual relief of 400 million euros within the fiscal equalization process. These reliefs are expected to take effect starting in 2026.