"The good news is: the need has been recognized"

The financial situation of local authorities in Germany is coming to a head - and Berlin is no exception. At the VBKI Business Breakfast, Finance Senator Stefan Evers spoke openly about the dramatic development of public budgets and the growing pressure to reform. The event was moderated by VBKI President Markus Voigt, who discussed solutions between the debt brake, investment backlog and administrative reform with Evers and the audience.

In his keynote speech, Evers made it clear that the challenges are massive - and have been building up for years. Politicians reacted quickly and decisively to crises such as coronavirus and the Russian war of aggression in Ukraine - for which Evers expressly praised the parties in power at the time. However, the associated special expenditure, combined with long-term increases in transfer payments due to demographic change, for example, have increasingly unbalanced budgets. "We are dealing with gradual damage," said Evers - the structural consequences were recognized far too late - or did not want to be seen. During the coalition negotiations in Berlin, finances did not play a central role, the mindset was different at the time, the finance senator reported self-critically.

The figures are dramatic: in 2022, the municipalities in Germany combined still achieved a surplus, in 2023 the deficit was already nine billion euros and in 2024 there was a loss of 25 billion euros. "Everyone has their backs to the wall." It is particularly alarming that citizens are the first to notice whether the state is still functioning at a local level - at the daycare center, school or citizens' office. But it is precisely this level that is now particularly threatened in its ability to act - and thus the citizens' trust in their state.

In view of this situation, Berlin must say goodbye to its cherished special ways: "We are one of many - we are saving three billion euros this year. And yet spending is still rising." Evers is particularly critical of the shifting of federal expenditure to the federal states - for example through tax relief, which reduces municipal revenue without counter-financing. Although the federal government now wants to compensate for this, "structurally, nothing has been gained". Instead, long-term relief and investments in the future must be made possible - for example through special funds or new debt rules for the federal states and municipalities. In Berlin, €5.2 billion from the federal government's €100 billion infrastructure fund is now to be used - a sum which, according to Evers, "is crucial for us to be able to make central investments at all".

Another of the senator's key concerns is the reduction of bureaucracy. The density of regulations in Germany is now so complex that even experts are often unable to see through it. This is detrimental to competitiveness and blocks necessary innovations. "If we carry on like this, it will all come crashing down on us," warned Evers and pleaded for a reduction in standards wherever possible.

In the ensuing discussion, moderator Markus Voigt emphasized the gap between government action and public perception: "The Senate's work is better than its image." He cited the administrative reform as an example - a "masterpiece" according to Voigt, but one that had hardly led to more approval among the population. Evers agreed with him, but emphasized that opinion-forming does not only work via the media. "We prefer to talk about excitement rather than success. We have to change that - together."

It became clear this morning that the political and financial leeway in Berlin is tight. This makes an honest prioritization and a structural change of course all the more important. The fact that the Senator for Finance is proactively calling for this willingness to reform is an important signal. Because as Evers said: "The good news is: the need has been recognized." Action must be taken now - before it really is too late.