Government in NRW fears burden from third relief package - economy

Exploding energy prices and an impending recession have alarmed the state government of North Rhine-Westphalia. One looks "with great concern" at the development of tax revenue in autumn and winter, it said on Monday from the Ministry of Finance of the most populous federal state. In addition, the Ministry of Finance in Düsseldorf fears burdens "of more than three billion euros" as a result of the measures announced by the federal government last week relief package. The bottom line is that the uncertain budgetary situation is endangering the central reform projects of the black-green coalition, such as an additional year of childcare free of charge or a higher salary for elementary school teachers. "The scope to implement new things that the coalition considers important is small to zero," said Finance Minister Marcus Optendrenk (CDU).

The tax administration of North Rhine-Westphalia still concedes that the flow of taxes to the Rhine and Ruhr is still bubbling up. For example, revenue from value added tax rose by almost twenty percent in spring compared to the previous year. In addition to the increased prices (which automatically increase tax revenue), this rapid increase can be explained by the fact that the economy - unlike in 2021 - got through the spring without a corona lockdown.

In the fourth quarter at the latest, however, there is now a threat of "a slowdown." On Monday, the Finance Ministry in Düsseldorf even made a comparison with the 2008 banking crisis, which resulted in a global financial crisis. "Cascading effects and a very sharp slump" in tax revenue are possible. So far, the Düsseldorf financial experts had hoped that the high inflation could roughly offset the fiscal consequences of an economic slump. "But we're no longer sure about that."

The Dusseldorf Ministry of Finance has expressed massive criticism of the previous plans of the Berlin traffic light coalition for a new, third relief package totaling 65 billion euros. The federal government's proposals would open up a budget gap of more than three billion euros in NRW alone in 2023, according to Düsseldorf. The NRW financial experts have serious doubts about the previous calculations of the Federal Ministry of Finance (BMF). The House of Finance Minister Christian Lindner (FDP) calculated last week that the federal government would contribute around 36.5 of the 65 billion euros in 2022 and 2023. The BMF estimated the income, among other things, from the planned electricity price brake at at least 10 billion euros - which would mean a residual financial burden for the federal states due to additional expenditure or reduced tax revenue of around 18 to 19 billion euros.

Fiscal politicians in NRW, however, calculate differently. According to Düsseldorf estimates, the federal and state governments would have to shoulder the burden "almost fifty-fifty". That is "unfair" and the states cannot be expected, after all, the federal government is primarily responsible for stimulating the economy in the event of a crisis. A more appropriate split would therefore be "75 to 25".

Prime Minister Wüst wants to put together the traffic light package

Specifically, representatives of the black-green NRW government criticize two traffic light proposals. First, Düsseldorf rejects the Berlin proposal that the federal and state governments should each spend 1.5 billion euros in 2023 for a successor to the 9-euro ticket in buses and trains. Prime Minister of North Rhine-Westphalia Hendrik Wust (CDU) and his Transport Minister Oliver Krischer (Greens) are demanding additional billions to expand public transport and to cover the deficits that the transport companies are suffering as a result of the Corona crisis and higher costs for fuel and electricity. Wüst, currently chairman of the Prime Ministers' Conference (MPK), asked last Friday in an interview with the editorial network Germany (RND) for the federal states "an additional three billion euros per year" from the federal government in order to expand public transport. The subsidies for a new cheap ticket would come on top of that. Wüst wants to put together the traffic light package again - and negotiate it at an MPK with Chancellor Olaf Scholz on September 28th.

Wüst is also likely to present the concerns of his financial experts about a second item in the relief package: The traffic light does not want to tax one-off special payments from employers to employees in 2023. The Federal Ministry of Finance puts the tax revenue shortfall from such an "inflation premium" of up to 3,000 euros per employee at 1.2 billion, with the federal states accounting for a large part of these costs. This calculation is called "wrong" in Düsseldorf, because: The BMF assumed that nationwide only five million employees would receive such a bonus. "There will be significantly more," the Düsseldorf Ministry of Finance believes, "our defaults will be much higher." For the state budget, in turn, that would further narrow the scope - "to zero".

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