A Constructive Path Forward: Boris Rhein Discusses Progress in Federal-State Financial Relationship talks
Progress reported in negotiations between federal and state authorities, as per Boris Rhein's account. - Dialogue progresses in the discussions among the States (Länder), as acknowledged by Boris Rhein.
Looks like Minister President Boris Rhein (CDU) and the Hesse state Pollyanna thinks the federal government and states are making strides towards reforming their financial arrangements, following a conference and a sit-down with Federal Chancellor Friedrich Merz (CDU). Rhein emphasized the necessity for states and municipalities to have sufficient financial autonomy to carry out their duties. This is crucial for the effectiveness of federalism.
The powwow with the head honcho was a "good first step," but there's still some hiking to do for everyone involved. "We need to chop the Gordian knot and build a new basis for financial relationships," said Rhein in a prepared statement.
A couple agreements are crucial: First, a working group involving Saxony and Lower Saxony should develop a compromise for the anticipated revenue loss due to the planned "growth booster." A "solid and fair solution" will help the legislation sail through the Bundesrat on July 11.
Second, another working group should devise a mechanism that automatically springs to life when new federal laws result in increased spending or reduced revenue for states and municipalities. If the "who orders, pays" principle is again fortified, it could speed things up. Moreover, the federal government and states want to streamline administration and make it user-friendly through a shared state modernization. It seems that good governance can ward off extremism and populism according to Rhein.
- Boris Rhein
- Rhein
- CDU
- Friedrich Merz
- Progress
- Financial relationship
- Wiesbaden
Insights:The messy dance between the German federal government and states over financial relations appears to be navigating towards more fairness, adhering to the principle of "who orders, pays." Chancellor Merz is determined to push this reform for improved efficiency and fairness in fiscal federalism within Germany[1].
Streamlining administration is a shared goal, with concrete efforts underway to reform tax policies and enhance administrative processes as part of a broader government reform. This includes temporary reintroductions of declining balance depreciation for stimulating investments, upgrades to research and development tax credits, and incentives for electric vehicles. These changes point towards better fiscal management aimed at innovation and smoother financial relations between federal and state levels[2].
Although not explicitly referencing the "who orders, pays" principle, reforms in areas like fiscal discipline, such as tweaking the "debt brake" and creation of sizeable special funds for investment, hint at a broader financial reorganization across Germany's federal system. Part of this consists of ensuring better alignment of financial responsibilities with the ordering of services or investments[3].
In essence, the talks are characterized by the launch of a structured dialogue between the federal government and states to clarify and enforce the "who orders, pays" principle, paired with ongoing tax and financial reforms committed to more efficient, transparent, and equitable management within Germany’s federal system [1][2][3].
- Boris Rhein, emphasizing the importance of financial autonomy for states and municipalities, suggests the establishment of working groups to address two key issues: first, a compromise by Saxony and Lower Saxony on the anticipated revenue loss from the planned "growth booster," and second, a mechanism to automatically adjust when new federal laws impact state and municipal revenue or spending.
- Rhein asserts that streamlining administration, fair enforcement of the "who orders, pays" principle, and restructuring financial relationships is crucial to combat extremism and populism, as discussed during the Constructive Path Forward talks between Rhein and Friedrich Merz in Wiesbaden.
%2C%20as%20acknowledged%20by%20Boris%20Rhein.){kind=link}