Investment Plan Revised for Remuneration Adjustments - Wüst advocates for financial reimbursement in investment program initiative
Straight talk, straight ahead
In the ongoing battle between the federal government and the states over the multi-billion-euro investment program, Hendrik Wüst, North Rhine-Westphalia's Minister President, is ramping up the pressure on the feds. Wüst is demanding that the federal government compensate the states and municipalities for the tax relief-induced revenue losses.
The "Konnexitätsprinzip," or "who orders, pays" principle, is enshrined in the coalition agreement between the Union and the SPD, Wüst reminded the crowd in Duesseldorf. Now, it's time to put the principle into action, he said. "We're not just along for the ride," added the CDU politician.
On the eve of the meeting between the minister-presidents and Chancellor Friedrich Merz, Wüst declared, "We're going to the federal government with the demand for full compensation." However, he acknowledged a 90% compensation could be acceptable if a solid, long-term solution is on the table.
Positive Vibes, Yet Pressure Mounts
Despite his demands, Wüst expressed optimism that progress would be made in the meeting with Merz. "I'm feeling good," he said. But he emphasized that the legislative project needs to move forward quickly if an agreement is to be reached by the Bundesrat meeting on July 11. "Failure to do so will send the project to the conciliation committee," he warned.
Wüst also praised the planned investment program by Federal Finance Minister Lars Klingbeil (SPD). "Germany needs growth," said Wüst. "We've been in a recession for three years now, which we've never experienced before, neither during the oil crises nor the corona pandemic. New growth impulses are necessary to save jobs."
The federal government plans to enhance tax depreciation options for companies and gradually lower the corporate tax rate to 10% by 2032. However, the municipalities will bear the brunt of the resulting revenue losses.
Revenue Losses for the States and Municipalities
According to calculations from the state circle, the proposed law will result in close to 50 billion euros less in tax revenue for the federal government, states, and municipalities. The states and municipalities would be responsible for roughly 30 billion euros of this sum by 2029, according to Wüst. Without compensation, the NRW state budget would face a 3.7 billion euro burden by 2029, while municipalities would suffer an additional three billion euros in losses. Wüst stated that the investment package wouldn't completely throw the budgets of the states and municipalities off balance during the third year of recession.
Wüst Presses for Action on Old Debts
Wüst also called for the swift implementation of the agreed-upon special asset of 500 billion euros. Out of this fund, the states are to receive one fifth, or 100 billion euros, according to the current plans. Additionally, the federal government should submit a bill to reduce municipal debts before the summer break. If the old debt problem isn't addressed, many municipalities won't be able to make necessary investments.
"Break free from the crushing debt burden first!" Wüst asserted. He also warned the federal government, "Neither the investment fund nor the leeway for state debts were ever agreed upon as a quid pro quo for approving the immediate program."
Local Governments Warn Federal Government Against Broken Promises
North Rhine-Westphalia's municipal associations also demanded compensation from the federal government for the tax losses. "Those who decide on tax cuts must also bear the tax losses themselves," the associations declared. "The federal government's planned investment booster will be the first test of how seriously the authorities take the coalition agreement."
Ignoring the municipalities and financing the tax reform with their infrastructure and climate-neutrality funds would be a breach of trust, the municipalities warned. Given the already stressful financial situation, genuine compensation for the municipalities is urgently required.
Bold, no-nonsense leadership
With the NRW local elections scheduled for September 14, Wüst insists on binding regulations, arguing that financially strained as it may be, NRW has already allocated billions of euros for debt reduction. Now, it's the federal government's turn.
The Konnexitätsprinzip—a fundamental principle in the coalition agreement—is at the heart of these negotiations, as both parties seek binding rules for cost allocation and overcome longstanding monetary conflicts between the Bund and the Länder.
Business and financeIn the ongoing debate about the multi-billion-euro investment program, Hendrik Wüst, North Rhine-Westphalia's Minister President, emphasizes the need for the federal government to compensate states and municipalities for tax relief-induced revenue losses, referring to the "Konnexitätsprinzip" or "who orders, pays" principle outlined in the coalition agreement.
Politics and general-newsWüst also calls for the prompt implementation of the agreed-upon special asset of 500 billion euros, with states set to receive 100 billion euros, and for the federal government to present a bill to reduce municipal debts before the summer break. Failure to do so, according to Wüst, couldresult in the project being sent to the conciliation committee. The municipal associations in North Rhine-Westphalia join the demand for compensation from the federal government for tax losses. They warn against ignoring the municipalities and financing the tax reform with their infrastructure and climate-neutrality funds, threatening a breach of trust and further financial stress.
