Updated
Updated · DW (English) · Jul 12
Merz, State Premiers Back Funding for New Municipal Mandates as Local Debt Tops €200 Billion
Updated
Updated · DW (English) · Jul 12

Merz, State Premiers Back Funding for New Municipal Mandates as Local Debt Tops €200 Billion

1 articles · Updated · DW (English) · Jul 12

Summary

  • September 1 is the start date for a new rule under which federal and state governments will have to fund any new duties they impose on municipalities, Chancellor Friedrich Merz said after agreeing the change with state premiers.
  • €200 billion in existing local debt and nearly €30 billion in new borrowing in 2025 pushed Berlin and the states to act, as municipalities say unfunded mandates and a seven-year economic slump have crushed revenues.
  • Oberhausen shows the strain: the city ran a roughly €100 million gap on a €1.2 billion budget and still had €800 million in debt at end-2025 even after a North Rhine-Westphalia bailout.
  • 50% of Oberhausen's spending goes to social services, with rising youth welfare, long-term care and housing costs forcing cuts to culture, a 50% parking-fee increase and plans to eliminate 5% of city jobs.
  • Mayors say the deal helps only future laws, leaving current obligations intact and adding pressure for broader fixes such as a larger municipal tax share and full debt relief.

Insights

With its last assets gone, can cooperation between cities save Germany's industrial heartland from total financial collapse?
As German cities face bankruptcy, is the far-right AfD the only political winner in this nationwide financial crisis?