Germany, known for its solid economical foundations and effective public administration, faces a serious financial crisis at local level. According to a study published by the Welt portal, as many as three-quarters of German counties face expanding debt problems, which threatens serious consequences for residents and the functioning of local institutions.
Regions at the end of financial opportunities
According to reports, most German counties are already on the verge of their financial capabilities, and the situation is becoming increasingly dramatic. "We are increasingly faced with crises that we must overcome. It works, but the point is that districts are inactive getting fresh tasks, and the number of regulations is increasing," says Reinhard Sager, president of the German Union of Districts. The expanding number of responsibilities assigned to local governments, while the deficiency of adequate financial resources, leads to a systematic deterioration.
Change from surplus to deficit
In 2022 the financial situation of the districts was comparatively stable, with a budget surplus of EUR 600 million. Unfortunately, the situation has changed dramatically in just 1 year, leading to a deficit of almost EUR 2 billion. According to data provided by the German Association of Districts for the WELT AM SONNTAG newspaper, by the end of 2023 German counties, cities and municipalities are expected to evidence an overall budget deficit of EUR 13.2 billion.
Critical request for additional funds
The president of the territory Council, Reinhard Sager, does not hide the seriousness of the situation: “Perspectives have never been as grim as they are now”. Sager clearly points to the request for additional funds to meet the increasing financial needs of the counties. "The specified cost of housing as part of citizens' money paid by neighborhoods is simply a immense and increasing burden," he adds.
The districts have a wide scope of responsibilities, including moving hospitals, labour offices, wellness offices, youth care, immigration administration, garbage disposal, emergency services and crisis management. The simplification or cancellation of services in these areas could lead to serious social consequences, as Sager clearly points out: "I think it would be disastrous given the strained atmosphere in the country."
The request to improvement the taxation system
In order to address the increasing problems, Sager calls for an increase in the share of municipalities in the division of turnover tax. Currently, cities and municipalities receive only 2.2 percent of full sales taxation revenues, while the remainder goes to national and state governments. "This requires redistribution," argues Sager, pointing out the request to change the strategy of financing for local governments in order to prevent further deepening of the crisis.
Summary
The financial crisis faced by the German counties is the consequence of the expanding budget deficits and the expanding burden on public tasks. Without adequate reforms and additional funding, the situation could have serious consequences for residents and the stableness of local institutions. The president of the territory Council, Reinhard Sager, calls for urgent changes in the strategy of taxation distribution, which could be a key step towards financial stabilisation of German counties.
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Revenue goes down, social spending goes up. German counties on the brink of bankruptcy
