The federal states face financial collapse: Where danger exists the solutions also emerge

Since the tax estimates of May 2003 the financial crisis has been official in Germany. Up to 2007 at least €126 billion in tax revenues will be lacking in the already strained federal, Länder and municipal public budgets. That the Länder have also been on a dangerous financial and structural-policy course for years has been largely hidden from the public consciousness, although a disturbing trend towards the worsening of almost all fiscal figures in almost all Länder has been recognisable for ten years (for example, a drop in the investment ratios of Länder budgets, increase of per capita indebtedness, the interest burden and interest tax rate). In 2002 and also this year Bavaria alone will meet the stability criteria of Maastricht. All other 15 Länder would have to reckon with more or less serious penalties from Brussels. Due to limited fiscal-policy leeway, the Länder should take up other available options, such as educational-policy measures or administrative reforms, to develop strategies for succeeding in the site competition of the regions, in the opinion of Prof. Norbert Berthold and Stefan Drews, Würzburg University