Abstract
The financial situation of local authorities in Germany has deteriorated dramatically over the past year. Cities, municipalities and districts ended 2024 with an unprecedented deficit of €24.3 billion. This is almost three times higher than previous record levels, which were set in 1992 and 2003. Compared to the previous year, the deficit has almost quadrupled. This exceptionally high shortfall in municipal budgets is due to spending that significantly exceeds revenue growth. The critical state of municipal finances is also referenced in the coalition agreement of the new German federal government, although no specific reform measures have yet been outlined. Without rapid and comprehensive reform, however, there is a risk of permanent imbalances in municipal finances, which would have a significant negative effect on the services provided by cities, municipalities and districts.