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Germany: Finance Minister proposes billions for indebted cities | News | DW

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German cities most in the red may soon benefit from government aid, Finance Minister Olaf Scholz said on Saturday.

In an interview with media group Funke, Scholz said Berlin “has signaled its willingness” to help remove 40 billion euros ($ 44 billion) in debt from local authorities on a “one-time basis”.

Of Germany’s 11,000 local authorities, Scholz said the plan affected “around 2,500 towns and municipalities that are so in debt they can barely breathe.”

Debt cancellation would likely force local authorities to spend more on repairs and upgrades to much-needed infrastructure in schools, kindergartens and swimming pools.

Most of the over-indebted municipalities are located in states such as North Rhine-Westphalia, Hesse, Rhineland-Palatinate and Saarland, which have been hit hard by deindustrialisation.

Scholz added that “the interest rates are favorable” to the restructuring of the public debt.

Despite being center-left, Scholz continued the debt-free policy of his conservative predecessor

Relax the “black zero”?

The plans signal a possible change in the German government’s longstanding resistance to public spending.

The proposal is still expected to be agreed with German Chancellor Angela Merkel’s conservatives, Scholz’s center-left SPD coalition partners, before it comes into effect.

It is also likely to be repelled by the leaders of Germany’s 16 states, who may be reluctant to funnel funds to financially troubled cities outside of their states.

Scholz largely maintained the so-called “black zero” of his predecessor Wolfgang Schäuble – a policy of not incurring new debt.

Although Germany is proud of its balanced budget, the government is under increasing pressure from economists and other members of the European Union to stimulate its economy with larger investments in order to avoid a possible recession.

rs / ng (AFP, dpa)

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