Solidarity Pact II to Be More Effective | Business| Economy and finance news from a German perspective | DW | 31.01.2005
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Business

Solidarity Pact II to Be More Effective

Federal and state governments are again negotiating the financing of the eastern German states. Both sides agree that the €156 million ($203 million) support, referred to as the Solidarity Pact II, promised to rebuild the infrastructure in the East has to be used more effectively. The demand of state premiers from the East to make the promise legally binding until 2019 has met with resistance from Berlin. Up till now, only a financing of €100 million has been guaranteed legally. Chancellor Gerhard Schröder warns that if the higher sum is also made binding, federal budget problems could develop. The eastern states fear the remaining sums may never be seen without legislation. Federal Transport Minister Manfred Stolpe, who is in charge of the program to strengthen the East, reassured the state premiers from Brandenburg, Mecklenburg-West Pommerania, Saxony, Saxony-Anhalt and Thuringia that cuts in subsidies were not the purpose of the negotiations, rather how the funds could best be invested to benefit the economy and secure more jobs. The federal government does not intend to dictate how the states use the money, but it no longer wants the millions to be used to cover state budget deficits. Economic data from the region in 2004 paint anything but a rosy picture.

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