Municipalities are experiencing historically low levels of performed tasks or services.
In a growing financial crisis, over 200 municipalities in Germany are demanding state reform, calling for greater support from the federal government and a new division of tasks to address the financial crisis. The deficit for municipalities in 2024 reached a staggering 24.8 billion euros, the highest since German reunification in 1990.
The crux of the issue lies in the federal tax policy decisions, as they should not lead to tax losses at the municipal level. Despite an increase in municipal revenues by 3.5 percent, tax revenues grew only slightly by 1.5 percent. Consequently, the distribution of finance between the federal government, the states, and the municipalities needs to be regulated anew.
One area where the municipalities have seen significant growth is in social expenditure, which reached 84.5 percent and increased by 11.7 percent. Expenditure on child and youth welfare increased by 17.1 percent, while integration assistance increased by 13.6 percent. The federal government is being urged to take over the unemployment benefit for Ukrainian refugees to alleviate some of the financial burden on the municipalities.
Personnel expenditure also saw a substantial growth of 8.9 percent. However, there are no clear search results detailing which cities and municipalities issued an open statement to the future coalition partners or the specific demands made. The focus remains on local political issues and party debates without naming specific cities issuing such a statement or listing demands.
The municipalities are also advocating for more involvement in Value-Added Tax (VAT). The income tax brought in 2.1 percent more, while VAT brought in only 0.7 percent. This imbalance is a concern for the municipalities, and they are pushing for a more equal distribution of tax revenues.
The coalition talks have contentious topics for municipalities, with the need for no additional tasks for municipalities that are not financed being a key concern. The federal government and the states must ensure that social expenditure does not grow indefinitely, and that any new tasks assigned to the municipalities are accompanied by sufficient funding.
In the face of these challenges, the municipalities are urging for late shifts in working groups during coalition talks to ensure their concerns are adequately addressed and solutions are found to alleviate the financial crisis. The future of Germany's municipalities hangs in the balance, and it is clear that action must be taken to address this pressing issue.
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