Federal-state finances
Söder indicates that he will waive legal action regarding state financial equalization
Updated on December 26, 2024Reading time: 3 min.
A lawsuit against federal and state finances is awaiting a verdict at the Federal Constitutional Court. When that will happen is unclear. Now CSU boss Söder is naming conditions for an out-of-court settlement.
Under certain conditions, CSU boss Markus Söder is willing to withdraw Bavaria’s constitutional complaint against the state financial equalization. “If there is an agreement, we are ready to reach an agreement out of court and withdraw our lawsuit against the state financial equalization,” said the Bavarian Prime Minister of the German Press Agency in Munich.
“The most unfair financial distribution in Germany”
“The state financial equalization is the most unfair financial distribution in Germany,” emphasized Söder. Bavaria is “fundamentally overwhelmed”. In addition, it is neither performance-based nor fair. “Even countries that incur additional debt receive money from Bavaria.”
In July, Bavaria filed its lawsuit against the financial equalization with the Federal Constitutional Court. It is completely unclear when the court will make a decision.
The Free State is calling for new regulations because it has borne by far the greatest burden in the compensation system for many years. In the process, the twelve federal states of Berlin, Brandenburg, Bremen, Hamburg, Mecklenburg-Western Pomerania, Lower Saxony, Rhineland-Palatinate, Saarland, Saxony, Saxony-Anhalt, Schleswig-Holstein and Thuringia have come together to form a litigation community.
Around 18.5 billion euros were redistributed between the 16 federal states last year. Bavaria paid in almost 9.9 billion euros of this. According to the Federal Ministry of Finance, Baden-Württemberg paid almost 4.5 billion euros and Hesse 3.25 billion euros. Around 814 million euros flowed from Hamburg and a good 107 million euros from Rhineland-Palatinate.
“We don’t expect the nine billion to be completely eliminated. But we expect a significant reduction in payments and a new mechanism,” emphasized Söder.
Bavaria has already paid in more than 120 billion euros in its history and only received around 3 billion euros. In order to reach an agreement between the states, a new federal-state finance commission is needed. “A change of government is a good reason for this.”
Söder also makes the reorganization of the financial structure a condition for any negotiations about the debt brake: “We are sticking to the debt brake in the federal government. But it must be clear to everyone: Anyone who wants to change the financial architecture in Germany cannot do that with the CSU, without including the state financial equalization.” The federal and state finances would have to be fundamentally put on a new footing. The CSU could otherwise block a reform of the debt brake with its votes in the Bundestag.
Söder sees the financial relationships between the federal and state governments as fundamentally disturbed. Even though Bavaria pays so much for state financial equalization, individual states still have to declare an emergency and take on new debt. For this reason they also wanted a new debt brake. “But it is clear to us: Without a change to the state financial equalization, there will be no consent from Bavaria or the CSU to changes to the debt brake.”
According to Söder, the reorganization of federal-state finances requires a departure from the previous “mixed model”: “The federal government sometimes provides too little money for new tasks – and the states then have to implement them at great expense,” he said. This means that the countries are regularly overwhelmed. As an example, he cited the legal right to all-day care in primary school. “Improvements are urgently needed here. The states will not be able to finance this on their own in the long term.”
According to Söder, there is also a need for action with Deutschlandticket
Söder also sees a need for action on the Deutschlandticket: “It’s called the Deutschlandticket – but at the moment the states have to finance a large part of it.” This leads to less regional investment in infrastructure, routes and public transport because a lot of money flows into the ticket. “So the federal government will have to cover these resources more in the long term. The simplification that the ticket has brought across all transport associations should definitely be retained – even if the ticket price cannot be kept high in the long term.”