Do we need measures to boost municipal economies?

In his government statement of 14 March 2003, Federal Chancellor Gerhard Schroeder announced, among other things, his interest in low-interest loans for specific local investment projects. In the opinion of Prof. Helmut Seitz, Frankfurt/Oder University, this proposal "is merely a low-interest programme for municipal infrastructure projects. To hold expectations that with this programme, with its subsidy of 2 euro per inhabitant, will bring a perceptible stimulus to local investment activity not to mention the economy as a whole is certainly inflated". The danger that the programme will only lead to a restructuring of existing loans and to free-rider effects is put forward by Prof. Gunnar Schwarting, Rheinland-Pfalz Städtetag. Also Dr. Birgit Frischmuth, Deutsche Städtetag, expresses scepticism: "With a loan programme of the Kreditanstalt für Wiederaufbau, the goal of effective immediate help for the municipalities will not be achieved... There is no alternative to municipal finance reform". For Prof. Horst Zimmermann, University of Marburg, "a short-term strengthening of the revenue of cities makes sense...The conclusion is that a municipal economic stimulus programme is a very wise strategy at the present time".