Nordhausen imposes budget freeze: 2.5 million euros at risk!

Nordhausen imposes budget freeze: 2.5 million euros at risk!

The city of Nordhausen has imposed a budget freeze of around 2.5 million euros in order to secure liquidity. Mayor Kai Buchmann, non-party, announced the decision today. The reasons for this measure lie in the expected lower tax revenues and higher expenses for subsidies to kindergartens. Despite the budget freeze, payments required due to legal obligations and investments that have already begun are still possible. These preventative steps once again show the financial challenges that many municipalities in Thuringia and throughout Germany are facing.

The pressure on local finances is being increased by a weakening economy and the federal government's new plans to provide tax relief for companies. A program to stimulate the economy will be discussed in the Bundestag next week. This provides incentives for investments, including expanded tax depreciation options, especially for machines and electric vehicles. In addition, a reduction in corporate tax is planned from 2028, which could lead to loss of revenue for the federal, state and local governments.

Consultations at the political level

The financial difficulties of many highly indebted municipalities have also led to the states demanding financial compensation from the federal government. This topic will also be addressed in the discussions between the federal and state governments as part of the Prime Minister's Conference in Berlin. The current events in Nordhausen cannot be viewed in isolation, as similar budget blocks and financing problems can be observed in municipalities throughout Germany.

In the federal government itself, the Ministry of Finance has already imposed a spending freeze on multi-year projects. This measure affects almost the entire federal budget, including the climate and transformation fund. Against the background of a ruling by the Federal Constitutional Court, which declared the reallocation of 60 billion euros in the 2021 budget to be null and void, existing obligations will continue to be met, but new obligations may not be entered into. Experts fear far-reaching consequences for other special funds too.

Politician reactions

In view of this situation, the SPD is calling for the debt brake to be suspended in order to close the financial hole of 60 billion euros. However, Federal Minister of Economics Robert Habeck currently sees no majorities in favor of changes to the debt brake. The discussion about alternative sources of income is initiated by SPD General Secretary Kevin Kühnert, while Left Party leader Dietmar Bartsch proposes a “climate wealth tax” to finance it. The FDP, on the other hand, is clearly against suspending the debt brake and is bringing cuts to social benefits into play.

A hearing in the Budget Committee will take place today, in which experts will explain the consequences of the controversial ruling. Many questions remain unanswered, in particular whether projects from the climate fund need to be moved to the regular budget for 2024. The situation remains tense, both in Nordhausen and at the federal level.

For more information on developments in Nordhausen, please visit thueringen.de and for the nationwide aspects of the budget freezes look up tagesschau.de.