Published by Global Banking & Finance Review®
Posted on August 30, 2025
2 min readLast updated: January 22, 2026
Add as preferred source on GoogleChancellor Merz promises debt relief for municipalities by 2026, addressing financial burdens ahead of NRW elections.
By Andreas Rinke
BONN, Germany (Reuters) -Germany's federal government will begin helping municipalities to pay down old debts from January 1, 2026, Chancellor Friedrich Merz said on Saturday, two weeks before his government faces its first electoral test since taking office.
Merz made the pledge at the party conference of his Christian Democrats, or CDU, in the German state of North Rhine-Westphalia which is holding local elections on September 14, four months after his government came into power.
State and municipal leaders say the federal government has imposed extra welfare costs on municipalities without providing them with the necessary funds to finance them.
In NRW, Germany's most populous state and a bellwether for national politics, the municipal debts were around 55.4 billion euros ($64.86 billion) at the end of 2024.
"We will present a draft law on municipal old debts later this year," Merz said. "We want to bring it into force on January 1, 2026."
This would only provide modest help for municipalities, however, he said, adding that, together with Germany's 16 states and the federal government, they needed to get their "ever-exploding expenditures" under control.
He also called for vigorous reforms of Germany's welfare systems, which the country could no longer afford, he said.
"We have been living beyond our means for years," he said.
While Merz's CDU is set to remain the largest force in NRW, according to state polls, the far-right Alternative for Germany could make strong gains.
No longer just an eastern protest party, the AfD has leapfrogged Merz's conservative CDU/CSU alliance in some national polls to come in first place in recent weeks.
($1 = 0.8542 euros)
(Reporting by Andreas Rinke and Sarah Marsh; editing by Barbara Lewis)
Chancellor Friedrich Merz announced a plan to help municipalities pay down old debts starting January 1, 2026. This initiative will be presented as a draft law later this year.
Municipal leaders argue that the federal government has imposed additional welfare costs on them without providing adequate funding to cover these expenses.
As of the end of 2024, municipal debts in North Rhine-Westphalia amounted to approximately 55.4 billion euros, equivalent to about $64.86 billion.
While Merz's CDU is expected to remain the largest party in North Rhine-Westphalia, the far-right Alternative for Germany (AfD) has been gaining ground in recent polls.
Merz called for significant reforms to Germany's welfare systems, stating that the country can no longer afford to live beyond its means.
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