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Municipal Policy in Halle (May 29, 1994)

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Rauen: You bring up a crucial point. I’ll try – you’ve described me as a wanderer between two worlds – to make this clear to you. I’ll just take the examples of Bonn and Halle, because they are perfectly suited to demonstrating the differences. The two cities are nearly identical in population, but the two cities differ in their structure. Bonn, as you know, is home to an extraordinary number of government agencies and services, which – as far as the federal agencies are concerned – are all institutions that pay no trade tax, and this makes Bonn a city that is relatively weak in terms of trade tax. Halle was a city very strongly shaped by industry and commerce, always was, and should therefore have a particularly high share [of income] from commercially generated taxes. But the exact opposite is the case: with the same number of residents, the city of Bonn – where I was once treasurer, I’ll just take an approximate figure from 1992 – took in about 250 million in trade taxes, whereas the city of Halle took in 16.8 million during that time. Of course, in the meantime, western German, and southern German cities, too, have suffered losses, because the weakness of the economy has affected them as well; still, if I take the rate in Bonn, which I don’t know specifically according to the latest figures from 1994 – if I assume that this figure of 250 million remained more or less the same – then we have a growth here [in Halle] of around 24 to 25 million. As you can see, this is a glaring distortion. And if we now take the share of the income tax, in Bonn we have, of course, a population with an above-average income, and here [we have] a population with an income that is slightly above-average for the new states, so in that respect it’s possible to compare the two cities as well. In Bonn, the share of the income tax, again, is 250 million Deutschmarks and in Halle it’s 50 million. That’s to say, in one case one fifth, in the other case very small fractions, and if you now add all of this up so the listener can get a picture, you’ll end up with a share of 25% self-financing by the cities in the new federal states; that means, in other words, that 75% needs to be made up by contributions from third parties, and these are contributions by the Land [federal state], and since the new Länder [federal states] are also poor, the paymaster is primarily the federal government, that is, tax payers throughout all of Germany. Without this substantial help, these cities are of course in no position to engage in self-government. In view of the figures I have just mentioned – that is, a shortfall of 75% – there’s no need at all for me to describe to you the disaster that would ensue if this were not made up. But one must also add right away, only if one really grasps these figures can one recognize the immense importance of what we refer to in shorthand as the “Solidarity Pact,” for this solidarity pact is, so to speak, the financial guarantee for the deficits that exist in the East German cities and in the East German states. Thus a balance is achieved here only through this gigantic transfer of tax revenue from the Western federal states; and the fact that this naturally leads to losses for western and southern cities, for the Länder in the West – so that an appropriate approximation of the Western standard can be gradually achieved here – invariably leads to unhappiness on one side and discontent on the other, and perhaps this our problem here in Germany. But the general solution that has been found is a major political achievement; this must be said over and over again. This also must be said to the people here who have not yet understood this, because for them the term “Solidarity Pact” has yet to be filled with adequate substance.

Deutschlandfunk: Now, the financing of local governments – including those in East Germany – will occur in the near future through the entirely normal, let me say, State Fiscal Equalization Scheme [Länderfinanzausgleich]. What will that mean for the cities? Will you then have guaranteed financing for the long term, or how will this be done?

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