German states agree to financial redistribution deal
October 14, 2016
After longstanding negotiations, Germany's central government and states reached an agreement on future financial relations, sources close to the negotiations said on Friday morning.
Chancellor Angela Merkel met with several state premiers to strike a deal on federal and state finances from 2020 onwards. News of the deal came after a marathon 14 hours of negotiations in Berlin, although full details were not released. Further negotiations were to be discussed later on Friday morning.
An agreement was necessary given the expiry of a solidarity pact - to inject cash into the former communist part of the country - in 2019.
The main point of contention in talks has been about whether richer states or the central government should bear the brunt of subsidizing the former East German states. To maintain approximately equal living standards across Germany, several billion euros of tax revenues are distributed each year both among states, and between the government and states.
In 2015, some 7.9 billion euros in sales tax were reallocated, along with 9.6 billion from the finances of the various states and 3.8 billion from the central government.
States had wanted to abandon the current arrangements and organize the reallocations themselves, but this was opposed by Merkel's conservatives as well as the junior coalition partner the Social Democrats.
rc/cw, kl (dpa, Reuters)