The help would come on top of an aid package worth a staggering €1.1 trillion rushed through parliament to shield Europe's biggest economy from the fallout of the pandemic.
The latest support would include an emergency aid component making up for lost tax revenues from crisis-hit businesses, newspapers Rheinische Post and Westdeutsche Allgemeine Zeitung reported, citing a finance ministry proposal.
All affected municipalities will “receive a lump-sum compensation for their lower corporate tax revenues,” the newspapers said.
Half of the cost of this compensation would be borne by the federal government, and the other half by state authorities.
Latest estimates from the ministry show that this year's corporate tax intake of local authorities would come in €11.8 billion short of a previous forecast.
In addition, the package would offer help to the most heavily-indebted municipalities.
The federal government will take on half of the debt incurred by the 2,000 most heavily-indebted municipalities — which was estimated at €45 billion in 2018.
“This protection shield should not only get cities and municipalities through the current difficult situation, but also put them permanently in a position where they can better perform their tasks,” Scholz, from the centre-left Social Democrats (SPD), told Rheinische Post.
Underlining the unprecedented scale of the crisis unleashed by the pandemic, Germany has opened its coffers to help shore up the economy, which was headed for “the worst recession” in its post-war history.