German cities struggle to fund social and climate measures, call for debt brake reform

Municipalities in Germany warn that they could be running out of money soon and are struggling to implement a wide range of their tasks, including guaranteeing a reliable public transport system and investing in climate action. “Municipal budgets are massively overburdened,” said Markus Lewe, head of the Association of German Cities (Deutscher Städtetag) and mayor of Münster. Cities such as Dresden were considering cuts to their public transport staff despite booming passenger numbers and looming costs for decarbonising the heating system add to the cities’ financial woes, the organisation said.

A reform of Germany’s debt brake, the ceiling on new borrowing by the state, is necessary to allow cities and municipalities to make new investments, it said, although Städtetag head Lewe conceded that his party, the conservative Christian Democrats (CDU), is sceptical about such a step. However, his colleague, Katja Dörner, mayor of Bonn for the Green Party and the organisation’s vice leader, in a press release said “it is the Städtetag’s position that we regard a reform of the debt brake necessary,” indicating that the debate is ongoing both at the national and at the municipal level.

The mayors said the federal government no longer could charge the cities with new tasks, particularly regarding social measures, for which costs had risen by one-third since 2013. The organisation also called for a reform of the tax revenue distribution between cities, states and the federal government.

A survey among cities showed that only six percent will present a balanced budget in 2025 and do not have to rely on savings to cover the expenditures. Ninety-five percent of cities said their future financial situation is “rather bad” or “very bad,” including wealthy ones, such as Munich. “It’s really serious this time,” said Leipzig’s mayor Burkhard Jung from the Social Democrats (SPD), also vice leader of the Städtetag.

A ruling by Germany's highest court in November 2023 declared an integral part of the outgoing coalition government's funding plan for climate and energy programmes unlawful, dealing a major blow to the Olaf Scholz’s coalition government. The court's decision threw the coalition's funding plans through a special "Climate and Transformation Fund" worth 60 billion euros into disarray and contributed to the early end of the coalition led by chancellor Olaf Scholz.