Old debts: Solution instead of silence, law instead of cornerstones
02.05.2024 – The Federal Ministry of Finance has once again presented the conditions for an old debt solution, NRW is the only federal state not to have reacted to this so far. The "For the dignity of our cities" campaign alliance is therefore calling for both to take a major step now.
Germany's financially weak municipalities are at a point where they never wanted to be: the point where their debts are growing again. In recent years, they have cut staff, postponed important investments in their roads and buildings and cut voluntary services in order to reduce debt. These major efforts have reduced their credit burden by around 20 billion euros. However, interest rate increases and spiraling costs are now worsening conditions to such an extent that the debt curve is pointing upwards again.
The local authorities are in a financial crisis. A total deficit of around seven billion euros in the 2023 budgets makes this abundantly clear. There is a cautious reaction to this situation at federal level: the Finance Committee of the Bundestag is pushing the issue with statements and questions. The responsible ministry announced a symposium on municipal finances for July 5 and presented its key points for an old debt solution unchanged once again in mid-April. It thus officially confirmed that it stands by its offer.
City Treasurer Martin WilhelmThe city of Offenbach could also benefit from a federal solution for old debts, provided that the federal government were to take over the municipal repayment shares for the Hesse Fund, this would have a positive budgetary effect of around 3.1 million euros per year in Offenbach.
North Rhine-Westphalia, the only federal state without an old debt solution, has not yet taken a stance on this. The state government was already aware of the key points of the Federal Ministry of Finance last year. Nevertheless, it presented a solution without substantial financial participation by the state and failed resoundingly. Those responsible are cultivating the narrative that the federal government is to blame for this and have so far given no indication that the new proposal planned for this year will bring about a major change.
The action alliance "For the dignity of our cities", in which financially weak municipalities from eight federal states (more than 8.7 million inhabitants) have joined forces, therefore formulated clear demands to both levels at its conference in Berlin:
NRW
The most populous federal state must present a solution for old debts, with which it will completely take over the excessive liquidity loans of the municipalities (more than 100 euros per inhabitant). The federal government will then be responsible for half of this. North Rhine-Westphalia therefore has the opportunity to relieve its local authorities of loans amounting to around ten billion euros. It itself only has to plan an annual contribution of 350 to 500 million euros for this - the same amount it is familiar with from the North Rhine-Westphalia recovery pact.
This is urgently needed for the millions of people affected in North Rhine-Westphalia - and beyond: other federal states with financially weak local authorities have already found solutions for old debts. However, these are only fully effective if the federal share is also available. North Rhine-Westphalia has so far blocked this with its behavior and should finally take the right path out of solidarity with Hesse, Rhineland-Palatinate, Mecklenburg-Western Pomerania, Lower Saxony, Brandenburg and Saarland.
Covenant
As the key points are well known, the Federal Ministry of Finance must now introduce a bill. The solution will require a two-thirds majority in the Bundestag and Bundesrat. The legislative process must therefore begin now so that the takeover of old debt can take place in the 2025 federal budget.
The future
It goes without saying that the financially weak municipalities will participate in the old debt solutions of the federal government and the state of NRW. And it goes without saying that they will also do their utmost to ensure that no new debts are incurred. This requires further steps: adequate funding for cities and districts and a reform of funding policy. The funds must be easily and unbureaucratically accessible and distributed according to need. Up to now, funding has mainly gone to wealthy cities and not to those in the midst of a municipal financial crisis.
Background information
The campaign alliance "For the dignity of our cities" brings together 70 municipalities from eight federal states, in which around 8.7 million people live. Members of the action alliance are Bacharach, Bad Schmiedeberg, Bischofsheim, Bochum, Bottrop, Castrop-Rauxel, Cottbus, Cuxhaven, Dietzenbach, Dinslaken, Dorsten, Dortmund, Duisburg, Ennepe-Ruhr-Kreis, Essen, Frankenthal, Geestland, Gelsenkirchen, Ginsheim-Gustavsburg, Gladbeck, Hagen, Hamm, Hattingen, Herne, Herten, Kaiserslautern, Koblenz, Krefeld, Lahnstein, Leverkusen, Löhne, Ludwigshafen, Lünen, Mainz, Mayen, Mettmann, Moers, Mönchengladbach, Mörfelden-Walldorf, Mülheim an der Ruhr, Neustadt an der Weinstraße, Neuwied, Oberhausen, Obertshausen, Oer-Erkenschwick, Offenbach, Pirmasens, Recklinghausen, Kreis Recklinghausen, Remscheid, Saarbrücken, Salzgitter, Schwerin, Schwerte, Solingen, Trier, Unna district, Voerde, Völklingen, Waldbröl, Waltrop, Werne, Wesel, Wesel district, Witten, Worms, Wülfrath, Wuppertal and Zweibrücken.
"For the dignity of our cities" has nine spokespersons: Dr. Rico Badenschier, Lord Mayor of Schwerin, Dirk Glaser, Mayor of Hattingen, Burkhard Mast-Weisz, Lord Mayor of Remscheid, Prof. Dr. Uwe Schneidewind, Lord Mayor of Wuppertal, Markus Zwick, Lord Mayor of Pirmasens, Barbara Meyer, 1st Mayor and Treasurer of Pirmasens. Mayor and Treasurer of the City of Saarbrücken, Andrea Pospich, County Councillor of the District of Cuxhaven, Christoph Gerbersmann, First Alderman and City Treasurer of the City of Hagen and Martin Murrack, City Director and City Treasurer of the City of Duisburg.