German municipalities struggle with record deficits | Germany| News and in-depth reporting from Berlin and beyond | DW | 14.05.2010
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German municipalities struggle with record deficits

The head of the German Cities Council has warned that German municipalities are facing the worst budget crisis in decades. All told, German cities and towns are 15 billion euros in the hole.

A man with pockets turned inside out

Cities and towns are having to dig deep to come up with cash

German municipalities are facing record levels of budget deficits in 2010, according to Petra Roth, head of the German Cities Council.

In an interview with the German newspaper Frankfurter Rundschau, Roth said the total deficit of German municipalities is around 15 billion euros ($19 billion), which is about 3 billion more than expected.

"Our budgets are completely overstretched," said Roth, who is also the mayor of Frankfurt.

Trade tax

Petra Roth

Roth, head of the German Cities Council, would like to keep the trade tax

While Roth praised Chancellor Angela Merkel's decision to put off planned tax cuts, she was critical of Finance Minister Wolfgang Schaeuble's intention to get rid of a trade tax.

The trade tax is a fee on company profits and has been helpful to municipalities. Critics of the tax, including many economic groups, say that the tax revenues only come from a few companies, as many are considered exceptions and not included.

Municipalities claim that the source of income is critical, especially since it reflects local economies.

Roth said that the trade tax had proven its worth despite some weaknesses, and that Schaeuble would do better to modernize the tax rather than getting rid of it completely.

Editor: Andreas Illmer

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