Von Krise zu Krise

Abstract

This article provides an overview of the financial situation of German municipalities and takes a long-term perspective on the developments that have led to the current situation. One important finding is that, although overall figures have pointed to relative fiscal stability for more than a decade, there is considerable heterogeneity across municipalities. There is a long list of financially weak municipalities that suffer from high debt, tight budgets, and decaying infrastructure. In addition to summarizing official budget data, particular attention is paid to survey results that point to a significant investment backlog in municipalities. Finally, the article focuses on the exceptional inflation situation in 2022 and lists several potential transmission channels through which rising prices can weigh on, but also support, municipal budgets. Since the link between fiscal and price developments at the local level has so far hardly been discussed in a German context, this last section offers a new contribution to the academic debate.