State Consolidation

Time to Reform German Federalism

Bremen's 'Town Muscians' could also symbolize the financially strapped city-state riding on the back of other states.
  • Why it matters

    Why it matters

    • Momentum is building to reform German federalism and possibly reduce the number of states to overcome growing debt loads.
  • Facts


    • Germany is debating new federal state financial equalization scheme.
    • The country currently has 16 states, of which only three are so-called “donor states.”
    • The federal state system is anchored in the German constitution.
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Annegret Kramp-Karrenbauer, premier of one of Germany’s smallest states, Saarland, wanted to get something for her state but ended up shooting herself in the foot.

Instead of reaching a settlement on past debts as part of Germany’s new federal state financial equalization scheme – Saarland is among the states with huge financial problems – Ms. Kramp-Karrenbauer ignited a national debate on reorganizing German states. [Under the financial equalization scheme, wealthier states support economically weaker ones. Eds.]

“A failure (to reach a settlement on debt) would ultimately question the current federal arrangement” and whether, for instance, there should be only six or eight states in the future, she said in an interview with German daily Süddeutsche Zeitung.

My advice: Go ahead and make changes. An opportunity will rise in 2019, when policymakers plan to reform the financial relations between the federal government and the states, including the expiring Solidarity Pact II and the financial equalization scheme.

Of the 16 states, only Bavaria, Baden-Württemberg and Hesse have remained “donor states.” All the others are more or less strapped for cash and incapable of meeting their  responsibilities in kindergartens and schools, science and research that have remained under their jurisdiction to the extent required in international comparison.

Structurally weak states on their own strength can’t live and can’t die.

The time is more than ripe for reorganizing the federal structure so that states can fulfill their duties in accordance with their size and capability. That was the original mandate of the Basic Law [German constitution. Eds.]. It is even more justified today than it was 65 years ago. The tasks reserved for the states has  considerably in the meantime shrunk, as the result of an increasingly integrated Europe. And the arguments for reform are more evident than ever.

Structurally weak states such as Schleswig-Holstein, which is a drain on Hamburg, Mecklenburg-Western Pomerania or Saxony-Anhalt simply don’t have a sufficient tax base. On their own, they can’t live and can’t die.

States with few inhabitants such as Bremen and Saarland spend too much per capita on political leadership and administration. In economic regions such as the Rhein-Main-Neckar area, state borders transect and block joint development potential.

The great theoretical advantages of a federal system – namely prompting cooperation and competition among equals – are analyzed and debated into thin air by work groups and commissions dominating the actual German federalism.

Not the only, but certainly the most depressing example of this “cumbersome consensus-machinery,” as Klaus von Dohnanyi, the former premier of the Hamburg city-state, once called it, is the standing conference of German cultural ministers. Up to now, this group has not succeeded in establishing common standards for schools and teaching staffs across the German states.

In the meantime, this sort of federalism has become what Robert Leicht, former editor of Die Zeit, once called an “executive federalism” in which the premiers of state governments dominate the stage and the parliaments play only a subsidiary role.

It is finally time to recognize that the existing federal structure, already seen in need of change in the early days of the Federal Republic, has become totally unhinged today. It is expensive. Some experts see a potential for annual savings of up to €1 billion ($1.2 billion) and others see far more, especially if the 16 state governments, 16 parliaments and 16 state administrations with corresponding second-tier agencies and institutions were reduced to six.

The proposals are on the table.

In addition to the unchanged states of North-Rhine Westphalia, Bavaria and Baden-Württemberg, the “six-state concept” would ideally create three more: a northern state comprised of Lower Saxony, Schleswig-Holstein, Mecklenburg-Western Pomerania along with Hamburg and Bremen; an eastern state with Saxony, Saxony-Anhalt, Brandenburg and Berlin; and a central state with Thuringia, Hesse, Rhineland-Palatinate and the Saarland.

Reforming German federalism is necessary and it would be well worth the effort.


Wolfgang Clement worked in both state and federal government. To contact the author:

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