Budget Battle

Federal States Reject Schäuble’s Financial Plan

  • Why it matters

    Why it matters

    German Finance Minister Wolfgang Schäuble has been trying to change the financial allocation system for some time now, but state governments want to maintain their autonomy.

  • Facts


    • Wolfgang Schäuble wants the central government to have more say in how state governments manage their finances.
    • Mr. Schäuble wants a new federal tax administration and for state tax revenues to be more transparent.
    • A joint statement by the 16 German states obtained by Handelsblatt said that Mr Schäuble’s proposal is “professionally unacceptable and is likely to lead to considerable distortions in tax enforcement.”
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Germany’s Finance Minister Wolfgang Schaeuble Delivers Speech On Europe’s Future
Wolfgang Schäuble, Germany's finance minister, is trying to reform the country's system of financial allocation. Source: Bloomberg

Germany’s Finance Minister Wolfgang Schäuble is not done tussling with regional state governments. His attempt to increase the central government’s say in their budgets is being rebuffed.

For two years, the federal chancellery and state governments have grappled over financial allocation policy. Mr. Schäuble had repeatedly submitted new proposals, but state governments have rejected them all. This Friday will be the latest sit-down to try to hammer out a deal.

At a critical meeting in mid-October, the contention seemed to be all said and done. Germany’s finance minister and the state premiers had agreed to a series of reforms which greatly favored state governments. However Mr. Schäuble did manage to push through a federal tax administration which had been discussed for years, and it was agreed thatthe federal government would be given a greater say in state use of their funds. But now Mr. Schäuble stands to lose even his consolation prizes.

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