Financial crisis: Many communities in Germany are threatened with ruin!

Financial crisis: Many communities in Germany are threatened with ruin!

In Germany, a growing number of municipalities are facing financial difficulties, which are leading to increasing debt. The mountain of debt owed by cities and municipalities amounted to 25 billion euros last year. This is part of a worrying trend compounded by rising costs for services such as childcare, street lighting and water supplies. Loud SWR Many cities are no longer able to carry out necessary maintenance. Roads remain in poor condition, bus services become less frequent and swimming pools close.

The causes of this financial misery are diverse. Collective bargaining agreements, high energy prices and inflation are driving up spending. Many municipalities have been appealing to the federal and state governments for a long time in order to receive the necessary subsidies. However, these are not growing at the same rate as increasing expenses. Professor Merdan Seker, an expert in municipal financial management, warns that municipalities will be forced to either increase taxes or cut voluntary benefits.

Debt and investment needs

The total debt of the municipalities, which includes all core budgets, was 134.3 billion euros last year. This is an increase compared to 127.9 billion euros in 2022, according to a response from the federal government to a request from the CDU/CSU parliamentary group. Against this background, it is clear that municipalities are suffering from a massive need for investment. There is an urgent need for action, particularly in the areas of schools, roads and bridges. The German Association of Cities has also emphasized that the condition of many municipal infrastructures is becoming increasingly worrying.

Markus Lewe, President of the German Association of Cities, sounds the alarm and reports double-digit billion-dollar deficits in the cities. This situation is further exacerbated by the escalating dispute between the state of Rhineland-Palatinate and the municipalities over the costs for refugees. Municipal associations have already commissioned a legal report on refugee costs in order to clarify the financial burden on cities.

Future prospects

Criticism of the federal government's plans to potentially reduce taxes is becoming increasingly louder. Municipalities fear that a lack of money in their coffers would further exacerbate an already precarious financial situation. There is hope for a “future pact” from the federal government that aims to strengthen cities. It is emphasized that an uncomplicated distribution of money locally is important in order to offer the municipalities a perspective and enable the necessary investments.

Overall, it is clear that the challenges for municipalities in Germany are considerable. The rising costs coupled with disproportionate support from the federal and state governments cast a shadow over the cities' financial future.