Many German local authorities nearing bankruptcy

Published on World Prout Assembly (first on WSWS.org), by Elisabeth Zimmermann, Last Updated January 22, 2010.

To take one example: in Dortmund, where those heating and housing costs are no longer covered by the state “purse,” such costs have risen over the last two years to €9.5 million. Thus, a rise in local council debt is inevitable. According to a forecast made by the municipal congress of North Rhine-Westphalia, 47 percent of local councils will be unable to keep any auditable budget accounts if they meet all their obligations, and therefore will have to subject themselves to the strict austerity programme of the relevant District Authority. In Wuppertal, which has been particularly affected by the financial crisis, five public swimming pools are to be closed this year. In addition, the town mayor, Peter Jung (CDU), has proposed the suspension of the planned renovation of the town theatre, and a €2 million cut in theatre subsidies over the next four years. This could lead to the closure of the theatre, which achieved world fame through its association with the Tanztheater Wuppertal Pina Bausch.

At the start of 2010, a number of local town and district councillors in Germany began to reveal the catastrophic current state of local authority finances. Government budget policies, together with the international financial-industrial crisis, have drastically intensified the economic pressures on many municipal and district authorities. Their level of debt in 2009 climbed to €5 billion, and it is feared that these debts could rise to €50 billion within the next five years. Hitherto unimaginable cutbacks and economy measures will be the result.

According to the German congress of municipal councils, local authority council tax revenues fell by €7 billion in 2009. Income from business taxes, the main source of revenue for local councils, fell by 18 percent. These taxes are paid by local businesses to their respective town or district governments.

For some local authorities, these business tax revenues have sunk by as much as 60 to 80 percent. The affected regions were, above all, those whose industries were running at full capacity until 2008 and then collapsed last year–for example, firms serving the auto and associated supplies industries, engineering, and the steel and chemical industries.

At the same time, social welfare payments, including the housing costs for unemployment benefit recipients, have risen sharply. These payments reached a record €40 billion in 2009. The director of the congress of municipal authorities, Stephan Articus, stated that he expects the gap between income and spending in council budgets to reach a record negative level of €11 billion during this year.

On top of the general impact of the economic crisis, the so-called “law to accelerate industrial growth,” introduced at the end of last year by the German government–a coalition of the right-wing Christian Democratic Union (CDU), Christian Social Union (CSU), and free-market Free Democratic Party (FDP)–has exacerbated the problems. Due to this law’s tax reductions on businesses and other measures, the tax revenue of local authorities will be further reduced by about €1.6 billion this year.

The meagre extra amount allotted to families (€20 per month) will be swallowed up by increased fees for kindergartens and child day centres, and costs associated with the lengthening of the school day. Last year, countless indebted town and district councils already implemented drastic cuts and economy measures affecting local authority infrastructure, social and cultural facilities, and welfare services … //

… In contrast to the banks and financial institutions, which received hundreds of billions of euros from the German government, local councils can expect no such assistance. When it comes to the social and cultural needs of the population, no money will be made available. The CDU-CSU-FDP coalition government has just created a “debt-limitation law,” anchored in the constitution, that acts as a mechanism to shift the burden of the crisis onto the shoulders of the working class. (full text).

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