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Berlin haggling with states over refugee subsidies

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Saying no. Again. Source: Reuters

Germany’s federal government is still at odds with state governments over how much more Berlin should towards the costs German states bear in taking care of, educating and integrating refugees into the community.

The states want a lot more than the €8 billion ($9.3 billion) budgeted over the next three years – namely, €3 billion more. The federal government doesn’t want to give them that much. Berlin holds most of the cards because it collects all the taxes nationwide and divvies up a set amount among the states.

Most of the financial cards, at least. This week’s riots and far-right demonstrations in Chemnitz after a murder shows how politically volatile the issue is. Berlin is aware that giving the states what they need to integrate the asylum-seekers is important to keep the peace.

Where you stand depends on where you sit

One of the ironies of the negotiations is that Finance Minister Olaf Scholz, who is being stingy in face of the states’ demands, was on the other side of the table until March. As the longtime mayor of the city-state of Hamburg, he knows what it costs to take care of refugees and he, alongside his fellow state leaders, demanded subsidies from the federal government.

The parties had hoped to reach an agreement by the end of August after they failed to reach an accord in June. How far apart they remain is evident in the “compromise” proposed by the Berlin officials to the state heads, which has been made available to Handelsblatt.

Instead of the annual subsidies totaling €3 billion, Berlin is offering a one-time payment next year of €435 million ($508 million) on top of the €8 billion already agreed to, specifically for costs related to childcare. Even this, the ministry’s proposal makes clear, is well beyond what the coalition partners had agreed to when they formed the government last spring. The compromise proposal also specifies that this concession doesn’t bind the government for subsequent years.

Whoever calls the tune, pays the piper

The states want the subsidies to be made permanent. They argue that the costs associated with the refugees will go on long after the more visible crisis that began in 2015 makes it expedient for the government to provide aid. “Since the federal government sets the framework conditions for asylum and refugee policy,” said Reiner Haselhoff, prime minister of Saxony-Anhalt, “it is only logical that it should contribute significantly to the costs incurred in the states for meaningful integration and support.”

Some in Berlin, however, suspect the states of using the issue to inveigle extra money out of the federal government as there is a lack of transparency about refugee costs in some states. State auditors in Saarland, for instance, recently admonished the state government for not publishing the costs in a fully transparent and verifiable manner.

Last year, Berlin spent nearly €21 billion on refugees with about €6.6 billion of that going to the states to subsidize their costs. However, that final total will likely increase because it is based on a fixed amount for every asylum-seeker who moves from registration to a decision, be it asylum or deportation, by authorities. Berlin has prepaid an additional €1.2 billion pending the final count.

The states also jumped on a passage in the compromise proposal that they feared would lead the government to reduce the subsidies after next year. The proposal said one of the objectives would be to examine “in the light of experience, a more efficient settlement” of refugee costs. They want to qualify “efficient” with the phrase “in accordance with the burden.” If nothing else, this hair-splitting shows the level of mistrust that has crept into the talks.

Martin Greive covers fiscal policy for Handelsblatt. Darrell Delamaide adapted this article into English. To contact the author: greive@handelsblatt.com.

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