Urgent warning: municipalities are heading for 30 billion euros in debt!

Urgent warning: municipalities are heading for 30 billion euros in debt!

The topic of municipal finances is currently at the top of the agenda. As Achim Brötel, the new president of the Baden-Württemberg district council, emphasizes, the municipalities face serious financial bottlenecks. Already in autumn the budget planning that affects not only the financial situation of cities and municipalities will affect, but will also have a noticeable impact on the reality of life of the citizens. "We are heading for a minus of over 30 billion euros," says Brötel, who also works as a district administrator in the Neckar-Odenwald district and heads the German district council. He describes the situation as dramatic and demands quick help instead of waiting until 2026, as Staatsanzeiger.

It is particularly worrying that in some places it is already considered possible measures that could include deletion of bus lines and cultural offers. These developments could favor the rise of extreme parties because dissatisfaction is growing among the population. The past few years have shown that municipal income has increased by 3.5 %, but expenses have grown by 8.8 %. One reason for this is the greatly increased expenses for social services, which according to the figures of the Schader Foundation caused a deficit of 24.3 billion euros. This means an increase of almost 300 % compared to previous years. So the municipal decision -makers should not be able to escape lightly.

Debt and deficits

At the same time, the municipal financial report 2025 shows that the financial situation of the municipalities has broken down across the board. The stagnating tax revenue reflects the weak economy and mean that important expenses such as personnel and social services grow unchecked. "The structural problems, especially for social expenditure, are unsolved," warns Brigitte Mohn from the Bertelsmann Foundation. It emphasizes that the high deficits question the financial ability of the municipalities that have over 50 % of public investments. The tasks of the municipalities have been expanded over the years, but were not sufficiently financed. This shows that we are in a dilemma: more and more tasks without the necessary money, and the municipalities are structurally underfunded.

Expenditures for social services have increased particularly dramatically, around 11.7 % in the areas of integration assistance and child and youth welfare. In view of these figures, it becomes clear how urgently reforms are necessary to stabilize the financial situation of the municipalities. It remains to be seen whether the future pact aimed for in the coalition agreement of the new federal government, which aims at strengthening municipal financial ability, also provides specific reform proposals. The currently pessimistic outlook on the financial perspectives of the municipalities doubts this, as the [Bertelsmann Foundation] (https://www.bertelsmann-stiftung.de/de/themen/aktuelle-zetungen/2025/juli/kommunale-finanzen-groesstes-defizit-in-der-geschichte-der-Dunden republic).

The urgent need for state reform not only becomes clear in political discussions, but also in workshops, as recently organized by the Schader Foundation and the Darmstadt University of Applied Sciences. Here approaches to reform options were discussed that should focus on both the expenditure and the income of the municipalities. Uwe Zimmermann, from the German Association of Cities and Municipalities, emphasized that the challenges such as digitization, reduction in bureaucracy and also climate protection measures had to be actively addressed. This is the only way to survive the municipalities of a critical situation without endangering the foundations of social cohesion.