It’s about an enormous amount of money – and about the ability of the municipalities in Germany’s most populous federal state to act: 199 of 429 cities and municipalities in North Rhine-Westphalia are considered to be excessively indebted. And the rate hikes by the European Central Bank will make their problems even worse. In order to counteract this, the state government now wants to take over half of these old debts. At the same time, the black-green coalition hopes that the federal government will shoulder the other half. But that is not settled.
The initiative presented the state minister responsible for municipal affairs, Ina Scharrenbach, on Monday. Although this had been discussed for a long time, the sudden advance came as a surprise. The state government wants to “work together with the municipalities and the federal government to enable this historic opportunity for comprehensive debt relief,” said the CDU politician.
North Rhine-Westphalia is the sad leader when it comes to cash advances
Overall, the communities in the federal state have accumulated more than 21 billion euros in so-called cash advances – which makes North Rhine-Westphalia the sad leader. However, only liabilities that are over 100 euros per inhabitant and are therefore considered excessive are accepted. This affects 19.7 billion euros in debt, which is spread over 199 municipalities.
The state government wants to take over half, i.e. 9.9 billion euros. The other half is to be borne by the federal government. In fact, Olaf Scholz (SPD) promised as early as 2019, as Federal Minister of Finance at the time, to relieve municipalities of part of the burden. The project can also be found in the coalition agreement of the traffic light government. In March, the Federal Ministry of Finance then published a key issues paper, according to which the federal government really wants to be responsible for half of the cash advances. The state government in Düsseldorf is now referring to this.
However, the Basic Law would have to be changed for such financial injections from the federal government. This requires the support of the CDU/CSU in the Bundestag and Bundesrat. And the Union only wants to agree to this if the federal states issue debt brakes in return, so that the municipalities do not have to face the same problems again in 15 years. To make matters worse, Bavaria’s state government rejects debt relief from the federal budget per se. No wonder: in Bavaria, Baden-Württemberg and Saxony, the municipalities are hardly indebted. The highest cash advances per inhabitant in Saarland, in Rhineland-Palatinate and in third place in North Rhine-Westphalia.
The opposition sees a sham
State Minister Scharrenbach assures that her government will in any case assume 50 percent of the debt, even if the federal government does not ultimately go along with it. However, the CDU politician wants to allay the concerns of the Union faction in the Bundestag and enshrine in law “a ban on re-borrowing” for the municipalities. However, this will be a ban “within limits”, there will be exceptions. She will talk to the town halls about the exact design.
These could be difficult conversations. Especially since the enthusiasm about the initiative is limited in the municipalities anyway. Because the state government wants to finance interest and repayment for the debts assumed by withholding more income from the real estate transfer tax and passing on less to the municipalities than before. But this would restrict “the cities’ financial leeway,” complains Essen’s Lord Mayor Thomas Kufen. The CDU politician chairs the city council in North Rhine-Westphalia. Jochen Ott, head of the SPD parliamentary group in the state parliament, even speaks of a “deceptive package”.