(de-news.net) – To enhance economic growth, the Federal Government has proposed a comprehensive business relief initiative, a policy reform deemed necessary by the Federal States. However, state premiers have expressed concerns regarding the potential financial burden this program may impose on regional and municipal administrations.
Michael Kretschmer (CDU), Prime Minister of Saxony and Chair of the Conference of Prime Ministers, has emphasized that although all 16 states support the relief initiative, they insist upon compensation for resulting tax revenue losses. The CDU-led state governments have formally advocated for the principle of “who orders, pays” in correspondence addressed to Federal Chancellor Friedrich Merz. Their proposal calls for a restructuring of fiscal relations between the Federal Government and the Federal States, suggesting measures such as an increased allocation of VAT revenue to state and municipal budgets as a mechanism for mitigating financial shortfalls. The letter, underscoring these recommendations, was endorsed by Kretschmer, Hendrik Wüst (North Rhine-Westphalia), and Boris Rhein (Hesse).
Alexander Schweitzer (SPD), Prime Minister of Rhineland-Palatinate, has maintained that states and municipalities should not bear the fiscal consequences of the reform unilaterally, though he anticipates an eventual consensus on tax relief. Prior to deliberations with Chancellor Friedrich Merz (CDU), a designated working group will seek to resolve outstanding financial concerns. Meanwhile, Markus Söder (CSU), Prime Minister of Bavaria, has cautioned against obstructing the reform process.
Manuela Schwesig (SPD), Prime Minister of Mecklenburg-Western Pomerania, has warned that the imposition of additional financial obligations on municipalities already operating under deficit conditions could counteract the projected economic benefits of the relief initiative. In contrast to Schweitzer’s perspective, Schwesig has indicated that the Federal Government’s policy approach risks disproportionately shifting financial responsibility onto state and local authorities.
