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Rich states push to curb federal redistribution

The Local · 24 Jan 2011, 14:55

Published: 24 Jan 2011 14:55 GMT+01:00

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The three powerhouses have prepared a constitutional challenge to federal equalization payments to keep in their pocket as a bargaining chip to negotiate a settlement with the states who receive the transfer money.

Under the Länderfinanzausgleich – or state financial equalization – rules, state revenue from sales tax and parts of income and corporate tax, are used to redistribute money to smooth out differences between the nation's richer and poorer states. Federal government grants are also used for the same purpose.

But the governments of Bavaria, Baden-Württemberg and Hesse, all net payers, decided at a joint cabinet meeting in Stuttgart on Monday to commission a legal challenge, which they would use to pressure other states towards a compromise.

They want an overhaul of the equalization system, under which the richer and more powerful states help the economically weaker ones. Among other complaints, they argue that the system gives recipient states no incentive to be fiscally disciplined.

At the same time, they made an offer to negotiate with other states who are the beneficiaries of equalization payments. If those talks fail, the three southern states could bring out the constitutional challenge.

So far, the recipient states have shown no willingness to discuss the issue. In 2010, nearly €7 billion were transferred as equalization payments.

The largest payer was Bavaria and the biggest recipient was the city-state of Berlin.

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Article 107 of Germany’s constitution demands that “the differing financial strengths of the states are adequately balanced.”

The Constitutional Court has never ruled precisely what “adequately balanced” payments entail. But it has ordered in the past changes to the system, notably in 1999, in response to a challenge from the same three states in 1999.

DAPD/The Local/djw

The Local (news@thelocal.de)

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Your comments about this article

19:18 January 24, 2011 by Gretl
This could be really interesting if it crosses the pond. During the last election cycle it was brought up by the Tea Party, only to be revealed that our state is a net federal receipient. It could have a real impact on the states' rights movement.
22:31 January 24, 2011 by Myles1965
I think it has crossed the pond, from Tea Party USA to Germany.
22:33 January 24, 2011 by jm80
If it crosses the pond? There's already a transfer union in place in the US. Just because Nevada, for example, is broke, doesn't mean they stop getting social security and medicare. But that really doesn't apply here anyway. This Laenderfinanzausgleich is of a whole different nature. Just since 1995, Berlin has taken 35 billion from other states. A black hole indeed:


Just imagine if the northeast were supporting the rest of the USA - that would be an accurate comparison to what is happening here in Germany. The three paying states looking to change the system just want what all of the 13 receiving states are already getting...and then some - like free university, free daycare, and civil servant benefits that Bayern, BW, and Hesse have had to cut. How Germany can be seen as the "engine of Europe" when only 3 of its 13 states are actually in the black is amusing to say the least, like saying Germany's unemployment rate is only 7% (as they don't count the 6.5 million long-term unemployed and consider 1-euro jobs as "work").
00:59 January 25, 2011 by fryintl
This is an interesting situation. As an outsider, who has extensive experience in teh country and a vested interest, it appears that once again, teh socialists are lookign to suck the productivity out of the last three states that have a means to support the growth of the German Economy. If you continue to take the money, people will see no reason to work harder and to make money, it is much easier to do little to nothing and just take money from teh government. There is a reason that Rheinland Pfalz, and other states are not functioning well. It is the basic Political parties that are mainly socialist and have no plan except to take from those that make the money and give to those who care not to even try.

Germany can break this cycle if they give up on the free money to those who are not willing to sacrifice to make it for themselves. If you have a land of farmers, then they should be happy wioth having the farms, producing what they can and live with teh money they make- no hand-outs. If you have a land with industry, then they will make more money with the producive workers and have more. Such is life.

The world has to stop giving free money, and people have to do without. If you can't afford it, don't but it or expect me to give you the money I worked hard for to pay for it.
09:52 January 25, 2011 by freechoice
maybe it is time to break away from the bundesrepublik?
10:29 January 25, 2011 by catjones
If DL is a microcosm of the EU, is Berlin Greece?
10:45 January 25, 2011 by So36
Bavaria had no qualms about taking money from NRW for years, so now suddenly it's their turn to pay and they balk? Hypocritical hicks.
14:29 January 31, 2011 by Johnny Cash
Would be good if it caught on at the European union
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