Prime Ministers demand relief: Is there a risk of financial chaos in the countries?

Prime Ministers demand relief: Is there a risk of financial chaos in the countries?

On June 18, 2025, the prime ministers of the federal states gathered in Berlin late in the morning to talk about the federal government's planned investment program. A central theme of the meeting was the heads of government's concern about the high loss of tax revenue that could arise for states and municipalities as a result of the federal relief package. Chancellor Friedrich Merz (CDU) is expected to take part in the talks in the early afternoon. Deutschlandfunk reports that the planned law is expected to lead to around 48 billion euros less tax revenue for the federal, state and local governments. The proposal has already been approved in the cabinet and is now being discussed in the Bundestag.

The Prime Minister is demanding financial compensation for the potential loss of revenue that could be caused by the law. The Prime Minister of North Rhine-Westphalia, Hendrik Wüst (CDU), emphasizes the need for relief measures for future economic growth. This comes in a year that is already the third without significant economic growth. The states and municipalities are forced to work with austerity budgets, which makes the situation even more difficult.

Demands for financial compensation

Some state leaders emphasize that the relief package cannot be approved by the Federal Council without financial compensation. The investment program provides better tax depreciation options for companies that invest in machinery, equipment and electric cars. The federal government also plans to reduce corporate tax from 2028. These measures are intended to stimulate the economy, but at the same time the law will mean that the federal, state and local governments will lose almost 50 billion euros in tax revenue. Daily Mirror reports that the federal government intends to cover a third of the lost revenue, while the other two thirds will be borne by the states and municipalities.

The Prime Minister of Mecklenburg-Western Pomerania, Manuela Schwesig (SPD), criticizes this distribution as unfair. In view of these challenges, the Prime Minister will meet again with Chancellor Merz next week to look for solutions together. The aim is to decide on the relief measures before the summer break in July. Finance State Secretary Rolf Bösinger emphasizes that the exchange was constructive and that both the federal and state governments are interested in a common solution.

The investment program is intended to provide advance payments in the short term and ensure greater economic growth in the long term. The discussions among the Prime Ministers will be crucial in determining how the financial framework conditions can be designed for the coming years.