Hot Off the Press! Occasional Paper 43: Bending the Constitution: The New Regulation of Intergovernmental Fiscal Relations in Germany

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In Germany, reforms of the intergovernmental fiscal relations were always difficult, however, changed legislation was always a result of high political expertise. The administrative preparations, and the negotiations demanded a lot of time. They were conducted by experts from both the administration and academia, often in public discourse. This legislation was based on a political agreement by the premiers of the Länder, forged behind closed doors, for which the federal government was supposed to pay. In the end the federal governments accepted this agreement in exchange for more federal powers, which shifts the federal balance in favour of the federation. This agreement was not developed within the usual procedures of parliamentary and public debates but – although all formal constitutional requirements were observed – in a private meeting of the top elites of Länder politicians.

In the end a proposal was provided which – according to the Länder Minister-Presidents – could not be altered.

Due to the legislation adopted it is possible that the disparities among the Länder will grow and the federal balance will be changed in favour of the federation. This not because of federal pressure, but due to the willingness of the Länder to sacrifice power for money. Vital questions like how to deal with demographic challenges or the not convincing primary distribution of tax revenues were not dealt with. Due to the issues outlined above, it is conceivable that the Federal Constitutional Courts will have to deal with this legislation soon after it comes into force.

Author Wolfgang Renzsch explores this dynamic in the pages of this Occasional Paper.
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