HomeWorldResearch: Corona throws municipalities back in debt reduction | Free press

Research: Corona throws municipalities back in debt reduction | Free press

According to a current study, cities and towns in Germany have survived the crisis well so far. But there is a simple reason for this. And the outlook is rather bleak.

Stuttgart (dpa) – The Corona crisis is thwarting the budgets of many cities and municipalities and is likely to lead to rising taxes and charges, according to a study.

Almost two thirds of the larger municipalities in Germany currently have or have already implemented such plans, according to the “Municipal Study 2020/21” of the consultancy EY. In addition, nearly a quarter of the cities and municipalities surveyed have recently reduced or intend to reduce services to citizens. Investments, on the other hand, have been and will not be globally scaled back.

However, many larger municipalities already had plans to increase taxes in 2019 and thus before the outbreak of the pandemic – even more than now. At the time, it was 68 percent who are raising taxes and wanting to make garbage collection, street cleaning and other services more expensive. Now it is 64 percent. At the time, 20 percent wanted to reduce services – for example, close swimming pools and sports halls or cut social offers. Now there are 23. In many places there is hardly any potential for this, they said.

According to the EY experts, cities and towns have generally survived the corona crisis relatively unscathed financially – which, according to the study, is mainly due to financial support from the federal and state governments. In 2020 these would make up on average ten percent of the total income of the municipalities. For example, income from business tax has now fallen by an average of 15 percent.

“The long-term impact of the pandemic on public finances will be significant,” said Bernhard Lorentz, Head of the Government & Public Sector at EY. “And the federal and state governments will not be able to close the municipal financial holes in the long run. All those involved are therefore faced with difficult years and other unpopular austerity measures. “

The “Municipal Study” is based on a survey of 300 German municipalities with at least 20,000 inhabitants in November. At the time, just under a third believed they could collect business taxes to the same extent this year as they did before the Corona crisis. Possible further effects of the current lockdown have not yet been taken into account.

47 percent said they would end 2020 with a budget deficit. In 2019, only 13 percent said so. “The pandemic has pushed back municipalities in their efforts to achieve financial recovery over the years,” said Lorentz. According to the survey, every second municipality expects its debt to increase in the coming years. And one in five does not believe they can pay off their debts on their own.

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