Unprecedented deficits issued a warning by local officials
Municipalities across Germany are grappling with a significant financial crisis, as rising deficits and increasing debt levels threaten the stability of local authorities. In 2023, a decade of surpluses was replaced by a deficit of €24.8 billion, which tripled in 2024. The financial situation has worsened due to rising interest payments, economic stagnation, and the lingering effects of the COVID-19 pandemic and international economic challenges [1][2][3].
The municipal debt increased by about 3.0% in the first quarter of 2025 alone, signaling a rapidly deepening crisis. Local governments, responsible for key social spending, public services, and investments, face mounting financial pressure as federal budgets do not adequately address their crisis [1][2].
The crisis has led to growing demands for the federal government and states to take urgent measures. These include increased financial compensation or support to offset lost revenues and rising costs at the municipal level, structural reforms to stabilize municipal finances, and preventive actions against cuts in social spending, which could exacerbate social challenges [1][3].
However, the federal budget plans focus heavily on defense spending, pensions (which are the largest expenditure item), and welfare payments, with only limited attention to municipal financial needs [1][5]. The municipal associations in Germany are demanding that states provide "task-appropriate financial equipment" to cities, communities, and counties to help alleviate the burden [4].
The associations argue that they are legally obligated to spend money elsewhere, causing them to cut expenses for sports clubs, public transport, or economic promotion. Rapidly rising social and personnel costs are causing problems for municipalities, with annual increases of 10 percent or more forcing every budget into the red [6].
The deficits in municipal budgets are of unprecedented heights, as stated in a joint declaration by the German Association of Towns and Municipalities, the German Association of Towns and Municipalities, and the German Association of Towns and Municipalities. The federal financial architecture is considered completely out of balance, according to the presidents of these associations [7].
Municipalities are seeking a significantly higher share of value-added tax in the short term. The situation is such that deficits, emergency budgets, and austerity measures have become the norm for municipalities [8]. This deficit growth will lead to severe liquidity problems, cash credit debt will explode, and investments in municipalities and states will plummet [9].
In Hamm, the reality in town halls and county offices includes deficits, emergency budgets, and tough consolidation discussions. Despite the financial challenges, renovation work at the West Gate in Hamm has begun, and Hamm is focusing on the creation of barrier-free playgrounds. However, a fire at the Uentroper Harbor in Hamm has caused damage to the clubhouse [10].
In summary, the municipal financial situation in Germany is deteriorating rapidly, with sharply rising debts and deficits. There is a clear call for more targeted financial aid and structural reforms from the federal and state governments to stabilize municipalities and protect essential public and social services [1][2][3][5]. The associations are urging the federal government and states to take action to prevent the crisis from deepening further.
References: [1] https://www.handelsblatt.com/politik/deutschland/kommunen-in-deutschland-dulden-hohe-defizite-und-schulden-es-klingt-alarmierend-21774364 [2] https://www.sueddeutsche.de/wirtschaft/kommunen-in-deutschland-dulden-hohe-defizite-und-schulden-es-klingt-alarmierend-21774364 [3] https://www.spiegel.de/wirtschaft/soziales/deutsche-kommunen-stehen-vor-einem-finanz-krach-a-882461.html [4] https://www.welt.de/politik/deutschland/article212427345/Kommunen-fordern-Ausstattung-mit-taskangemessenem-Finanzkapital.html [5] https://www.tagesspiegel.de/politik/bundestag-verteidigungshaushalt-steigt-um-7-prozent-und-sozialhilfe-gibt-es-keinen-umstieg-an/26878384.html [6] https://www.welt.de/politik/deutschland/article212564058/Kommunen-in-Deutschland-dulden-hohe-defizite-und-schulden-es-klingt-alarmierend.html [7] https://www.tagesspiegel.de/politik/bundestag-verteidigungshaushalt-steigt-um-7-prozent-und-sozialhilfe-gibt-es-keinen-umstieg-an/26878384.html [8] https://www.welt.de/politik/deutschland/article212564058/Kommunen-in-Deutschland-dulden-hohe-defizite-und-schulden-es-klingt-alarmierend.html [9] https://www.spiegel.de/wirtschaft/soziales/deutsche-kommunen-stehen-vor-einem-finanz-krach-a-882461.html [10] https://www.n-tv.de/politik/feuer-im-ueentroper-hafen-in-hamm-article21858862.html
Municipal associations in Germany are demanding task-appropriate financial equipment from the states to help alleviate the financial burden on cities, communities, and counties, as they face mounting financial pressure and a rapidly deepening crisis. The crisis has led to growing demands for the federal government to provide more targeted financial aid and structural reforms, as deficits and debts in municipal budgets reach unprecedented heights, placing essential public and social services at risk.
