Proposal sought for safeguarding workers from electronic communications network-related risks, as per the Commission's mandate.
In the heart of Germany, the states of Saxony and Saxony-Anhalt are grappling with significant financial challenges. By 2024, historic deficits in their municipal finances can be attributed to three primary factors: rising municipal debt, limited financial capacity relative to other German states, and challenges in generating sufficient tax revenue.
Firstly, municipalities and municipal associations in Germany saw an overall debt increase by 10.3% year on year in 2024, reaching €170.5 billion total. Per capita municipal debt in Saxony-Anhalt is relatively higher compared to Saxony, indicating a heavier financial burden on local governments there.
Secondly, Saxony and Saxony-Anhalt rank comparatively lower in gross regional product (GRP) and tax revenue collection. In 2022, Saxony’s GRP was €146.5 billion (3.8% of national GDP), whereas Saxony-Anhalt’s was €75.4 billion (2.0%). Correspondingly, Saxony reported tax revenues of about €15.85 billion (2023), while Saxony-Anhalt’s revenue figures are smaller and less prominent.
Thirdly, given the lower tax base and higher debt levels, municipalities in these eastern states face constraints in making necessary capital investments. Compared to western states like Bavaria or Baden-Württemberg with stronger economies, Saxony and Saxony-Anhalt have less financial leeway for infrastructure development or other municipal expenditures.
Despite these challenges, it's worth noting that while Saxony and Saxony-Anhalt carry significant municipal debt, their per capita debt is still lower than city-states like Bremen, Berlin, and Hamburg, and states like Saarland which hold the highest municipal debts among non-city states. However, their economic and tax revenue capacities lag noticeably behind wealthier western German states, impacting their overall financial health.
The financial problems in Saxony's municipalities are causing them to lose important financial leeway. In 2024, Saxony's municipalities showed a deficit of 840 million euros, while Saxony-Anhalt's municipalities demonstrated a deficit of 131 million euros.
Moreover, the financial situation in the East is worsening due to the lack of federal government coverage for these costs. High construction prices are distorting the investment figures in Saxony, and infrastructurally, municipalities in Saxony-Anhalt are at the bottom nationwide.
An additional significant piece of information is the potential closure of an airport in the East due to insufficient passenger numbers. This underscores the broader economic challenges faced by these regions.
Brigitte Mohn, President of the Bertelsmann Foundation, has warned about the financial capacity of municipalities in Saxony. Social expenditure in Saxony has risen by a third in two years, and in Saxony-Anhalt, social expenditure, personnel costs, and material expenditure are increasing significantly.
Tax revenues in Saxony-Anhalt's municipalities fell while running costs continued to grow. The increase in expenses is primarily due to a surge in personnel and social costs. As a result, municipalities in the East (Saxony-Anhalt) are increasingly lagging behind and losing ground.
Municipalities in Saxony are projected to reach an unprecedented deficit of 840 million euros by 2024, and Saxony-Anhalt's communal investments have fallen by more than 10% nationwide. The increase in expenses is a significant concern, as most of the social costs in Saxony are legally prescribed but not covered by the federal government.
The financial struggles in Saxony and Saxony-Anhalt highlight the need for concerted efforts to address these challenges and support the long-term financial sustainability of these regions.
- The financial troubles in Saxony and Saxony-Anhalt, rooted in their municipal debt, limited financial capacity, and struggles in generating sufficient tax revenue, are not exclusive to local matters, but involve intertwined aspects of business, politics, and general-news, considering their impact on the overall German economy.
- The financial dilemmas in Saxony's and Saxony-Anhalt's municipalities, aggravated by insufficient tax revenues and high social costs, have repercussions beyond the realm of local finance,potentially influencing the nation's broader economic landscape and business environment.
