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Financial crisis in Thuringia: A nightmare for municipalities is looming!
Nordhausen is facing financial challenges: Thuringian Prime Minister Voigt is calling for support for municipalities because of planned tax relief.
Financial crisis in Thuringia: A nightmare for municipalities is looming!
Recently, many cities in Thuringia and throughout Germany have been faced with a financial challenge caused by a weakening economy and the federal government's plans Tax relief for companies is tightened. Next Wednesday, the federal-state talks in Berlin will discuss what solutions can be found to overcome this crisis. Thuringia's Prime Minister Mario Voigt (CDU) has already called for clarification of federal-state financial relationships and is proposing an automatic compensation mechanism to cushion tax losses.
“The states should be relieved first, and as the economy recovers they could then make repayments to the federal government,” said Voigt. These proposals meet the concerns of the Thuringian Left co-chair Ralf Plötner, who warns of negative effects on Thuringian municipalities. He calls on Voigt to do everything possible to prevent financial losses.
Budget gaps and planned investments
A forward-looking municipal investment program in Thuringia, worth one billion euros over four years, could offer a way out of the financial misery. Nevertheless, Thuringia's Finance Minister Katja Wolf warns of significant revenue losses for the state budget that could result from the tax relief. According to her ministry's calculations, the budget could be affected in the coming years as follows:
| Year | Loss of income (in millions of euros) |
|---|---|
| 2026 | -43.6 |
| 2027 | -105.7 |
| 2028 | -182.6 |
| 2029 | -188.3 |
Wolf therefore calls for the federal government to provide financial compensation, especially since the negative impact on municipalities has not yet been fully recorded.
Countries in a quandary
The dilemma is further exacerbated by a multi-billion dollar tax package from the federal government to strengthen the economy. Although this package was fundamentally supported by the federal states, they are demanding financial compensation for the resulting tax losses. In the Federal Council, Prime Minister Hendrik Wüst (CDU) emphasized that the states and municipalities should not bear the costs alone. Without financial compensation, it could be difficult to agree to the tax package.
Experts estimate that the federal, state and local governments will collect a total of around 50 billion euros less in taxes. The federal government plans to cover a third of these outages, while the remaining two thirds must be borne by the states and municipalities. Thuringia expects over 200 million euros annually from the federal government's financial package, which would be distributed through the Königstein Key.
With a clear focus on the urgent financial needs of municipalities, the German Federation of Trade Unions (DGB) appeals to the federal government not to leave the affected cities out in the cold when it comes to trade tax losses and is calling for comprehensive compensation.
The coming discussions on Wednesday will be crucial in setting the course for the financial future of the states and especially the municipalities. It remains to be seen whether a common denominator will be found before the summer break in July. A good hand in negotiations is required in order to meet the challenges.