Growing economic gap between German municipalities: study

The economic differences between “strong and weak” municipalities in Germany were increasing, despite the good economic situation, according to a study by the Bertelsmann Foundation published on Tuesday.

In 2018, for the seventh year in a row, German cities, municipalities and districts achieved surpluses in their budgets, according to the study. Nationwide, reserves had risen from around 33 billion euros (37 billion U.S. dollars) in 2012 to 48 billion euros in 2017.

According to the Bertelsmann study, however, this wealth was unequally distributed among German municipalities and cities.

Of the 40 municipalities with the highest taxes, 39 were located in western Germany while 35 out of the 40 municipalities with the lowest taxes were in eastern Germany.

“The gap between strong and weak cities has been widening for many years. People’s opportunities in life are becoming more and more dependent on their places of residence,” the Bertelsmann study cautioned.

While the so-called “strong cities” in Germany together recorded an increase in cash reserves of 3.8 billion euros between 2010 and 2017, Germany’s “weak cities” recorded a deficit of 0.9 billion euros during the same period.

The cities in the south of the country generated particularly high revenues, while eastern German cities in particular could only draw on a small amount of their own revenues.

Germany’s richest district Munich, earned around 3,816 euros in tax revenue per inhabitant, while the poorest district earned just 667 euros.

The Bertelsmann report showed that tax revenues for German municipalities resulted almost entirely from the region’s economic structure, which made it “almost impossible for weak municipalities to catch up”.

“The weak cities have lower tax revenues, higher social spending and long-term deficits”. In addition, the poor cities would be highly indebted and had hardly any reserves, said Renee Geissler, municipal finance expert at the Bertelsmann Foundation.

In recent years, many of the weaker German municipalities even raised their tax rates in order to increase their revenues. “These local tax rates are increasingly becoming a locational disadvantage,” added Geissler.

“What is needed in concrete terms is the help of the German government, with a view to highly indebted cities,” Burkhard Jung, president of the Association of German Cities, told the public broadcaster ZDF on Tuesday.

“Now we need to support the poorer regions and cities in Germany in a large national effort of solidarity,” stressed Jung.