Berlin Sues for Help from Federal Government | Business| Economy and finance news from a German perspective | DW | 03.09.2003
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Berlin Sues for Help from Federal Government

Cash-strapped Berlin is appealing to Germany's highest court to force the federal government to grant it aid. But the feds say Berlin's financial misery is self-inflicted and not their problem.


Berlin blames German reunification for its financial woes.

Berlin, with its crane-dotted cityscape, has been reputed to be Europe's biggest building site for more than a decade. On the surface, the money may seem to be flowing continually into the German capital, but appearances can be deceiving. The city-state has €50 billion ($54 billion) in debts, and it's now prepared to bully the federal government for a helping hand.

The Berlin Senate decided on Tuesday it would appeal to Germany's highest court to force the federal government -- which rebuffed its requests in April 2003 -- to come to the aid of the cash-strapped capital with around €35 billion ($38 million).

Berlin's Senator for Finance Thilo Sarrazin was sanguine about Berlin's chances at the Constitutional Court in Karlsruhe. In an interview with the Tagesspiegel newspaper, he said legal precedents ensure that a state has the right to financial aid from the federal government when it cannot get itself out of "extreme budgetary distress" that is not its own fault. The Senate blames the city's financial plight on the costs of German reunification, high personnel expenses and the premature end to federal subsidies for the city after the Berlin Wall came down.

Sarrazin's calculations are based on a Constitutional Court ruling in a similar case in 1992 that laid down decisive criteria for the states of Saarland and Bremen in claiming federal aid. Berlin fulfills the criteria: Around 20.2 percent of its public expenditures are financed by loans, nearly double the national average (10.5 percent), and 20 percent of tax revenues are spent to cover interest on loans, also close to twice the national average (11.8 percent).

Self-made mess

But a spokesman for the Federal Finance Ministry told journalists the city's financial plight did not necessitate help from the federal government. Although Berlin could end up in receiving federal aid, the city was legally-bound to first try to solve its problems itself, he said.

Federal Finance Minister Hans Eichel had already rejected giving a hand-out to Berlin last November when he was informed of the city's intentions to claim federal aid. He said the capital was not in a much worse situation than other states and the city had created the mess itself.

An honest pauper

Even if Berlin wins in the Constitutional Court, Berlin Senator Sarrazin doesn't expect the money from the federal government to be forthcoming any time soon. The case in Karlsruhe will not be decided until 2006, he reckoned, and the cash wouldn't flow until 2007 at the earliest. By then Berlin's debt will have grown to around €66.8 billion.

"We will still have €32 billion in debts," Sarrazin said. "But then we will have the prospect of being able to manage our own affairs as an honest pauper in the future."

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