Monitoring Consolidation Obligations

In line with section 2 subsection (2) of the Consolidation Assistance Act, the Stability Council monitors compliance with the obligations that certain Länder must fulfil in order to receive ongoing consolidation assistance until 2019. These Länder are Berlin, Bremen, Saarland, Sachsen-Anhalt and Schleswig-Holstein.

As a group, these five Länder are receiving consolidation assistance of €800 million annually for the period from 2011 to 2019 (in line with Article 143d subsection (2) of the Basic Law)so as to be able to comply with the new debt rule coming into effect in 2020 . The respective amounts per annum are €300 million for Bremen, €260 million for Saarland, and €80 million each for Berlin, Sachsen-Anhalt and Schleswig-Holstein.

Payment of the assistance depends on compliance with steps towards consolidation. The five Länder are required to eliminate the fiscal deficit that they had in 2010 in 10 equal increments by 2020. A deficit ceiling is defined for each year in such a way that the previous year’s figure is reduced annually by 10% of the 2010 baseline value. According to the Consolidation Assistance Act, the fiscal balances may be adjusted for cyclical factors.

From 2012 onwards, the May meeting of the Stability Council has been taking decisions on compliance with the consolidation increments and disbursement of further consolidation assistance.

In accordance with section 1 subsection (1) of the Consolidation Assistance Act, the federation and the Länder have reached administrative agreements that govern the details of granting consolidation assistance. This includes a definition of the structural fiscal balance, the process for adjusting Länder budgets for cyclical factors, the baseline value for the 2010 structural deficit as well as the annual ceilings for fiscal deficits from 2011 to 2020.

The administrative agreements can be downloaded from the “Dokumentation” page in german.