Updated January 15, 2020, 7:48 a.m.
Numerous municipalities in Germany are heavily in debt. Finance minister Scholz holds out the prospect of discharge and plans to step in to cover old debts with federal money. But he attaches conditions to the help – and also calls for a “non-jealous country”.
Finance Olaf Scholz (SPD) provides conditions for the relief of highly indebted municipalities. The federal states must ensure that their cities and municipalities do not again accumulate such high debts, said the vice chancellor of the German Press Agency.
“If a municipality has a structural financial problem, the solidarity of the more prosperous regions of the country must be demanded through municipal financial equalization.” This means that richer communities should stand in for notoriously clammy communities in the same country.
Scholz wants to give one-off debt to the most indebted municipalities – “with a contribution of the countries in which they are located”. The goal is that cities and municipalities can then invest more money in their infrastructure.
For the federal aid, however, an act of solidarity is necessary, the finance minister emphasized. “We need a non-jealous country.” If he helps 2,500 municipalities out of 11,700, others will go away empty-handed. “We have to break the practice that we always have to get all the assignments if we want to help some.”
Millions of people live in highly indebted municipalities
According to the German Association of Cities, ten million people live in cities and regions with high debts. Municipalities in North Rhine-Westphalia, Rhineland-Palatinate and Saarland are particularly affected. According to the city council, the old municipal debts total around 42 billion euros.
North Rhine-Westphalia and Rhineland-Palatinate have already agreed to make their own contribution to the deleveraging of their municipalities. However, other countries such as Hesse, Lower Saxony, Schleswig-Holstein and Bremen expressed the expectation that their previous efforts to repay debt would also be financially recognized by the federal government.
The discussion about old debt aid is fueled by the record surplus around the federal budget. Supported by low interest rates, the federal government had 13.5 billion euros more income than expenditure last year, despite the weak economy.
Added to this are 5.5 billion, which, unlike planned, have not been withdrawn from a reserve.
Scholz wants to invest in digitalization, infrastructure and climate protection
Scholz promised to use the funds for additional investments – which also included the old debt relief. “We have continuously increased investments in the federal budget, and funds are being used more and more,” he said.
“We will stay on this course and use the surplus for more investments in digitization, infrastructure and climate protection and for equivalent living conditions.”
Scholz rejected the FDP’s accusation of having deliberately placed excessive interest expenditure in the budget in order to be able to show a plus in the end. “We cannot think of low interest rates as normal for the next few years, that would be highly irresponsible.”
For its planning, the Ministry of Finance therefore assumes that the interest rate will gradually rise again over the years. (Dpa / dh)
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