Municipality in need: Where is the urgently needed financial aid?

Municipality in need: Where is the urgently needed financial aid?

In a moving final budget speech, regional association director Peter Gillo (SPD) pointed out the alarming financial situation of the municipalities. “The levy is far too high and the financial difficulties of the cities and municipalities are great,” he explained. In 2025, 108 million euros in loans alone will have to be taken out in order to make urgently needed investments in school and daycare infrastructure as well as energy-saving renovations. Gillo emphasized that mandatory spending on social security, youth welfare and personnel continues to rise, while at the same time the number of cases handled by the social welfare office has exploded. All factions agree: the cities and municipalities are on the verge of financial collapse. It is also up for debate that in the future the federal and state governments will not be allowed to pass on additional financial obligations to municipalities that are not paid or only paid insufficiently. However, an urgently needed regulation for debt relief can only be decided at the federal level, as Roland König (FDP) made clear.

European perspectives and local challenges

The financial situation is not just a local problem. In a comprehensive study by the Council of European Municipalities and Regions, published in collaboration with the KDZ, the situation of municipal finances in 40 countries was examined. The study, titled “Local Finances and the Green Transition,” revealed that cities and towns in Europe have performed better than expected despite the massive challenges posed by the financial and COVID-19 crises. More than three quarters of municipal spending between 2010 and 2020 went into essential areas of life such as education and social services. What is striking is that local authorities finance more than half of all public investments, although they only account for a quarter of total spending. This underlines the central role that municipalities play in maintaining public services and climate protection.

Despite stable debt at the local level, the study also shows that in many European countries the financial autonomy of municipalities is being restricted. Particularly in countries such as Hungary and Spain, the share of subnational expenditure in general government expenditure has declined. There is also cause for concern in Austria, as municipalities enjoy below-average financial autonomy compared to other European countries. These findings could provide important impetus for the discussion about strengthening municipal finances in Germany and Austria in order to remain able to act in the future and enable necessary investments.

Saarbrücker Zeitung reported about the high financial burden on municipalities during the Council of European Municipalities and Regions published his important study on municipal finances in Europe.