German Chancellor Merz and State Leaders Discuss Municipal Financial Relief

Federal Chancellor Friedrich Merz met with the heads of the German states at the Minister‑President Conference in Berlin to renegotiate the Bundes‑Länder‑Finanzen. The discussion centred on the Konnexitätsprinzip – “who orders, pays” – and the need for a compensation mechanism that would cover the costs municipalities incur when new federal or state laws create additional financial burdens.  André Berghegger, chief executive of the German Cities and Municipalities Association, described municipal finances as “precarious” and urged a rule that also compensates for cost increases stemming from existing laws, especially in child‑ and youth‑welfare.  Merz said he fully shares the concern for municipal viability and hopes to reach a consensus, while rejecting a general tax‑law relief mechanism.  He announced targeted cost cuts for three social‑law areas – the child‑support advance law, the youth‑welfare law and integration assistance – as part of his effort to strengthen local budgets.  At the same conference, Michael Windfuhr of the German Institute for Human Rights warned that upcoming social‑state reforms must not compromise Germany’s obligations under the UN Convention on the Rights of the Child and the UN Convention on the Rights of Persons with Disabilities, emphasizing that funding for child‑ and youth‑care services must be protected.  The meeting also touched on broader topics such as state modernisation, bureaucracy reduction and digitalisation, but the primary outcome remains the search for a concrete formula to fully offset municipal cost increases caused by higher‑level legislation.