- Saarland loosens the debt brake for municipalities
The Saarland has eased the debt brake for cities and municipalities. As Interior Minister Reinhold Jost (SPD) told the German Press Agency, municipalities may take extraordinary loans of up to 480 million euros until 2027. This temporarily suspends the ban on new cash loans from the "Saarland Pact" agreed in 2019.
"Cities and municipalities need room to breathe," Jost said. "While allowing a yearly deficit of 120 million euros may not please everyone, 'one can also die beautifully.' The necessity is well-established, and the Saarland Pact foresees this exception in this case."
The agreement entails the state taking over half of the municipalities' former cash loans, totaling nearly two billion euros, and repaying them over 45 years. In return, municipalities committed to reducing their share of cash loans.
However, the Saarland Pact also allows an exception to this rule if the government recognizes an emergency, as it has now done. "After 2019, things happened that no one could have predicted," Jost said, referring to COVID-19, the Ukraine war, migration, inflation, rising energy prices, and the Pfingst floods in Saarland. This accumulation of crises has presented new challenges to Saarland's municipalities, justifying the emergency.
"We still want to live decently in this land and maintain municipal self-administration," Jost said. "The alternative wouldn't have been business as usual, but almost no municipal budgets would have been approvable."
This would have amounted to a halt in investments, also considering the 150 million euros in state funds for a municipal school construction program. "That would have been insane," Jost said. Investments also mean value creation in Saarland and thus stabilize the construction industry.
Jost firmly rejected the assessment that easing the debt brake means the Saarland Pact has failed: "It has not failed in any way, as it already accounted for the scenario of multiple crises leading to an emergency."
Many municipalities have expressed their gratitude for the new possibilities. "In Ensdorf or Püttlingen, otherwise, it would have been 'game over' this year," Jost said.
In Mettlach, Mayor Daniel Kiefer (SPD) is also pleased about the new cash loans: "It gives us a certain scope of action, and we must not forget that we still have to adhere to the Saarland Pact's guidelines to limit and further reduce our debts."
Of course, they will strive to keep new cash loans within limits while also ensuring the infrastructure for their citizens. "After the challenges of recent years, we now have the opportunity to tackle some things and make them future-proof again," Kiefer said.
The minister himself comes from the "municipal family."
The state government and the minister, who was a member of the municipal council and local mayor in Rehlingen-Siersburg for almost 30 years, deserve thanks for acting so swiftly. "Given that Reinhold Jost himself comes from the municipal family, it's only natural that he wants us to remain capable of acting and not tie our own hands just to meet these criteria of the Saarland Pact," said the mayor.
In the minister's view, there's no way around a federal solution to the debt issue for a long-term perspective. He also announced that a new review of the municipal financial equalization in Saarland would begin this year. A contract for this has already been awarded.
The Interior Minister, Reinhold Jost, mentioned that "The Commission" will be involved in the new review of the municipal financial equalization in Saarland. This indicates that a governmental or regulatory body responsible for overseeing and making decisions related to finances and municipal equalization will be playing a role in the process.
Furthermore, the Saarland Pact was agreed upon between "The Commission" and the Saarland state, implying that a higher authority or a body responsible for managing or governing such agreements was involved in the initial agreement made in 2019.
