Parliament questions flow of money out of Bavaria

The Maximilianeum where the Bavarian Parliament meets (MunichFOTO/Jeff Ely).

Bavaria wants a change in federal fiscal equalization (Länderfinanzausgleich).

The federal system in Germany includes a system of fiscal equalization between the Länder (Federal States). According to Article 72 of the German constitution, the target is to reach "equivalent living conditions" in all regions of the country. As a result, stronger states are obligated to pay for the weaker states. Since the passing of that law, and especially after reunification, the system has become increasingly unbalanced. The five new Federal States, which were part of the former German Democratic Republic (GDR) in the east, received financial stimulus from the reunification's outset, while the status of those receiving assistance in the west didn't change.

At the moment, only four of the sixteen Federal States (Bavaria, Baden-Württemberg, Hesse and Hamburg) are donors. Roughly half of all payments are made by Bavaria (EUR3.6 billion in 2010), and the Bavarian government expects that this amount will continue to rise to projected figures of more than EUR8 billion in 2013/2014. As a result, the state government has decided to take the matter to court. The system appears to be anything but balanced, and the popular wisdom here is that those receiving funds have no incentive to improve their fiscal situation.

Actually, Bavaria is the only state ever to change from a receiver to a donor. For 40 years, Bavaria received as much as EUR3.6 billion by way of the Länderfinanzausgleich (fiscal equalisation), however, since then the Bavarians have payed EUR38 billion. The accusation by the other Länder, as well as the opposition parties in the Landtag (Bavarian parliament), is that the wealthy southerners are attempting to abandon solidarity after having received help in the past. This has been roundly rejected by the present government coalition partners CSU and FDP. The other major donors  Baden-Württemberg and Hesse have not yet decided whether to join in the lawsuit. Many critics accurately point out that this action is motivated primarily by the upcoming election.

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