Local authorities face financial uncertainty as federal government, GroKo, declines to provide additional financial assistance.
In the face of renewed lockdowns and financial challenges, cities and municipalities in Germany are calling for a second aid package to help alleviate their financial situation in 2021 and 2022. This demand comes from two prominent associations, the German Cities Association and the German Association of Towns and Municipalities.
Helmut Dedy, managing director of the German Cities Association, and Gerd Landsberg, managing director of the German Association of Towns and Municipalities, have expressed concern over the worrying financial situation of cities and municipalities in the coming years. They argue that the renewed lockdown has had a significant impact on their finances, and a second aid package is necessary to offset both trade tax losses and income tax losses.
The communal associations are also seeking a refund of trade tax losses in the years 2021 and 2022. However, for another refund of the trade tax, the Basic Law would need to be changed again, but there is no majority for that.
Dennis Rohde, SPD parliamentary group chairman, has stated that further federal aid for municipalities in 2021 is not under discussion. The Grand Coalition has ruled out further financial aid for municipalities in 2021. Eckhardt Rehberg, chairman of the Union faction, also expressed opposition to further federal aid for municipalities.
Despite these objections, both associations have urged the federal government and states to provide funds for municipalities in 2021 and 2022. This call has been echoed by several political parties and organizations, including representatives from federal and state governments, who have proposed a second financial aid package for cities and municipalities as part of the "100 billion euros for investments" program.
The financial responsibility for municipalities lies with the states according to the federal order. However, states and municipalities are expected to reach their 2019 revenue levels next year, while the federal government will not reach this level until 2023. This suggests that the federal government is currently bearing the heaviest financial burdens in the corona crisis.
In a positive development, this year, there was a refund of trade tax losses by the federal government and the states, as demanded by the communal associations. The associations are demanding a similar refund for 2021 and 2022.
The demand for a second aid package is particularly relevant in view of the renewed lockdown, according to the German Association of Towns and Municipalities. As the situation continues to evolve, it remains to be seen whether the federal government and states will heed the calls of the associations and provide the necessary financial support to cities and municipalities.
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