Investment package: Countries united ahead of meeting with Merz

In the struggle over the investment package for new economic power, the heads of the federal states are united in their meeting with Chancellor Friedrich Merz today. "We have a common position," said Saxony's Minister President Michael Kretschmer (CDU) in Berlin. "We want this country to get back on its feet after three years of recession and a difficult situation. We want this federal government to be successful. If it is successful, it will be good for our country, for the federal states and the local authorities."

Kretschmer was optimistic that he would be able to agree "steps to compensate the local authorities and the federal states" with Merz and Federal Finance Minister Lars Klingbeil.

Lower Saxony's head of government Olaf Lies emphasized that decisions still needed to be made by the federal government so that the federal states could approve the plan in the Bundesrat on 11 July. "I am very confident that the Chancellor's Office will do the same," said the SPD politician. The economy is waiting for signals such as the so-called investment booster.

Plans mean around 48 billion euros less tax revenue

The Bundestag is due to decide on Thursday of next week on a program to boost the sluggish economy. It includes incentives for investment, including extended tax write-offs for machinery and electric vehicles. Corporation tax is also set to fall from 2028.

However, these plans would result in a loss of revenue for the federal, state and local governments due to falling taxes. According to the draft bill, local authorities would lose €13.5 billion, the federal states €16.6 billion and the federal government €18.3 billion - a total of around €48 billion.

The federal states are therefore demanding financial compensation from the federal government, pointing in particular to the precarious budgetary situation of many highly indebted municipalities.