Germany

Germany - Monitoring report

Date of the monitoring visit: from 27 to 29 June 2011 and from 27 to 28 September 2011
Report adopted on: 14 March 2012

This report is the first general monitoring of the European Charter of Local Self-Government on Germany (a visit carried out in 1999 focused solely on local finances, evaluated at the time as being in a critical situation). The report sets out in detail the complex structure of the regional and local authorities in the country. The Rapporteurs praise the federal and regional (Länder) constitutions for their recognition of the principle of local self-government. They draw the attention of the German authorities, however, to the persistent financial deficits of local and regional authorities, and underline the need to establish practical guarantees that complement constitutional provisions.

 

It is recommended to the German authorities that they strengthen and institutionalise the participatory rights of associations of local authorities both at federal and regional (Land) level. They are encouraged to set standards and criteria for concomitant financing in order to provide transparency in the whole financial calculation and planning process. The Government is also invited to consider extending counties’ rights to impose taxes directly beyond the available ones. Finally, Germany is called on to ratify the Additional Protocol to the European Charter of Local Self-Government on the right to participate in the affairs of a local authority.

The report for this country is not available in an “article-by-article analysis” format. The full text of the report is available on the country sheet in the DOCUMENTS section.
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Article ratified Ratified with reservation Non ratified
Compliance Partial compliance Non compliance To be determined
Article 2
Constitutional and legal foundation for local self government - Article ratified

The principle of local self government shall be recognised in domestic legislation, and where practicable in the constitution.


Article 2 of the Charter requires signatory countries to recognise the principle of local self-government in their domestic legislation. The German legal system acknowledges this principle, and both the Federal Basic Law and the Land constitutions contain constitutional guarantees for the administrative and legal status of local authorities. As we have seen above, Article 28 Section (2) of the Basic Law provides the right for local governments to regulate all local affairs under their own responsibility, within the limits prescribed by the laws. The right of self-government is also guaranteed, within the limits of the law, for the associations of municipalities. The financial autonomy, including the right of municipalities to have tax revenues are also defended by the Basic Law.

 

Remarkably, the constitutional recognition of the principle of local self-government resembles that of the Charter in a number of Land constitutions, referring to the right to regulate and administer local affairs in an autonomous way. The power of local authorities can be exercised within the legal framework provided by federal and Land legislation, in accordance of the Article 3, para. 1 of the Charter.

 

As it was described in Chapter 3 of this report, the constitutional status and the basic rights of local authorities are recognised equally in the federal and the Land constitutions. Most relevant laws of the Länder repeat and specify this status.

Article 3.1
Concept of local self government - Article ratified

Local self-government denotes the right and the ability of local authorities, within the limits of the law, to regulate and manage a substantial share of public affairs under their own responsibility and in the interests of the local population.


Consult reply indicated at article 2

Article 3.2
Concept of local self government - Article ratified

This right shall be exercised by councils or assemblies composed of members freely elected by secret ballot on the basis of direct, equal, universal suffrage, and which may possess executive organs responsible to them. This provision shall in no way affect recourse to assemblies of citizens, referendums or any other form of direct citizen participation where it is permitted by statute.


Consult reply indicated at article 2

Article 4.1
Scope of local self government - Article ratified

The basic powers and responsibilities of local authorities shall be prescribed by the constitution or by statute. However, this provision shall not prevent the attribution to local authorities of powers and responsibilities for specific purposes in accordance with the law.


As also discussed in Chapter 3 of this report, local authorities have, as a major rule, responsibilities in their own area. Although some tasks and functions are divided between the different levels of government, the Charter’s requirement for full and exclusive local government powers is a principle requiring discretionary power for local authorities, rather than a strict rule excluding cooperation with administrative organisations. The general competence principle (Allzuständigkeit) complies fully with the related provision of the Charter. The prevalence of this principle is reinforced by the freedom of local governments to undertake more tasks for the welfare of the local population on a voluntary basis.

 

The Charter also requires that local authorities should have discretionary power even as regards delegated powers, so as to adapt their exercise to local conditions. The delegation of tasks is practised in each Land. Although central supervision in these cases extends not only to the lawfulness, but also to the effectiveness of local authorities’ action. Still, the successful fulfilment of such duties needs a strong cooperation between the central and local authorities, allowing some discretion to the latter. Problems arise from the financing of delegated tasks, which was repeatedly evaluated by mayors, local representatives and officials as insufficient during the visit. But the scarcity of finances does not relate to this Article of the Charter, and will be discussed below (see section 10.6.).

Article 4.2
Scope of local self government - Article ratified

Local authorities shall, within the limits of the law, have full discretion to exercise their initiative with regard to any matter which is not excluded from their competence nor assigned to any other authority.


Consult reply indicated at article 4.1

Article 4.3
Scope of local self government - Article ratified

Public responsibilities shall generally be exercised, in preference, by those authorities which are closest to the citizen. Allocation of responsibility to another authority should weigh up the extent and nature of the task and requirements of efficiency and economy.


Consult reply indicated at article 4.1

Article 4.4
Scope of local self government - Article ratified

Powers given to local authorities shall normally be full and exclusive. They may not be undermined or limited by another, central or regional, authority except as provided for by the law.


Consult reply indicated at article 4.1

Article 4.5
Scope of local self government - Article ratified

Where powers are delegated to them by a central or regional authority, local authorities shall, insofar as possible, be allowed discretion in adapting their exercise to local conditions.

 


Consult reply indicated at article 4.1

Article 4.6
Scope of local self government - Article ratified

Local authorities shall be consulted, insofar as possible, in due time and in an appropriate way in the planning and decision-making processes for all matters which concern them directly.

 


Consult reply indicated at article 4.1

Article 5
Protection of local authority boundaries - Article ratified

Changes in local authority boundaries shall not be made without prior consultation of the local communities concerned, possibly by means of a referendum where this is permitted by statute.

 


The European Charter requires that local authority boundaries not be changed without prior consultation with the local communities concerned, possibly by means of a referendum where this is permitted by statute.

 

The administrative law of various German Länder makes the change of local government boundaries possible. The whole process is regulated by law and needs the concerning local authorities’ participation in the decision-making procedure. In some Länder, as in Baden-Württemberg, Brandenburg, Saxony, Saxony-Anhalt and Thuringia, any change to the status of a municipality requires a consultative referendum of the local community prior to the final decision. The rights of local authorities are protected also by Land constitutional courts. Municipalities may lodge complaints against the procedure.

 

The number of local authorities of the old Länder was 8,513 in 1994, while those of the former East Germany comprised 6,295 municipalities. The unified Germany altogether consisted of almost 15,000 individual local governments in the early 1990s. While in the Western Länder some progress has been achieved towards further integration of the local government system, only tentative reforms were accomplished in the Eastern Länder in the 90s. Since the first monitoring visit in 1999, municipal mergers have occurred in different degrees in the various Länder (see para. 38). The Congress delegation has not heard any contestation of the merger processes or any other change to local government boundaries.

Article 6.1
Appropriate administrative structures and resources for the tasks of local authorities - Article ratified

Without prejudice to more general statutory provisions, local authorities shall be able to determine their own internal administrative structures in order to adapt them to local needs and ensure effective management.


The right to determine their internal administrative structures belongs to local authorities who should be able to adapt their structures to the local needs and ensure effective management. Apparently, this organisational autonomy can be restricted only by law, in order to ensure the democratic operation of all local governments.

 

The basic conditions and framework for local authorities’ internal structures are regulated by the local government laws of the respective Länder. These laws set only general requirements as is usual in all democratic societies. It means that the local representative body cannot decide on what kind of organs it establishes or which type of officers it appoints, because the basic organisational and staffing issues are regulated by laws. Nevertheless, within these frameworks, individual local authorities are free to shape their own administrative structures (Organisationshoheit). In this sphere, they may determine the structure of their organs, the division of tasks and the internal communication and cooperation between them. The rapporteurs have not heard any objections or concerns expressed on this issue.

 

Article 6.2
Appropriate administrative structures and resources for the tasks of local authorities - Article ratified

The conditions of service of local government employees shall be such as to permit the recruitment of high-quality staff on the basis of merit and competence; to this end adequate training opportunities, remuneration and career prospects shall be provided.


Consult reply indicated at article 6.1

Article 7.1
Conditions under which responsibilities at local level are exercised - Article ratified

The conditions of office of local elected representatives shall provide for free exercise of their functions.


Local authorities have different sorts of responsibilities and duties, as far as their freedom to choose how fulfill them. In local public affairs, which are the primary mandatory functions of local governments (Pflichtaufgaben), local authorities decide whether and how to accomplish them, while  in case of voluntary tasks (freiwillige Aufgaben), municipalities have the widest discretionary power. The local power is the narrowest when local government carries out delegated tasks (vom Staat zugewiesene Aufgaben), because in all these cases, it exercises power on behalf of the central government, under its instructions and control.

 

These types of tasks and functions of local government are quite typical in the Council of Europe member states. The practice of delegating tasks and functions from the central government to local authorities under the strong control of the former is not incompatible with the principles of the Charter, provided that the central government simultaneously provides adequate financial compensation.

 

According to the Charter, the central administrative supervision of local authorities must be based on constitutional or statutory provisions, and normally can aim only at ensuring compliance with the law. Thirdly, central control must be exercised in a way so as to ensure proportionality between the extent of the intervention into local autonomy and the public interest for which it is exerted.

 

The rapporteurs’ opinion is that all conditions prevail in Germany.

Article 7.2
Conditions under which responsibilities at local level are exercised - Article ratified

They shall allow for appropriate financial compensation for expenses incurred in the exercise of the office in question as well as, where appropriate, compensation for loss of earnings or remuneration for work done and corresponding social welfare protection.


Consult reply indicated at article 7.1

Article 7.3
Conditions under which responsibilities at local level are exercised - Article ratified

Any functions and activities which are deemed incompatible with the holding of local elective office shall be determined by statute or fundamental legal principles.


Consult reply indicated at article 7.1

Article 8.1
Administrative supervision of local authorities' activities - Article ratified

Any administrative supervision of local authorities may only be exercised according to such procedures and in such cases as are provided for by the constitution or by statute.


Consult reply indicated at article 7.1

Article 8.2
Administrative supervision of local authorities' activities - Article ratified

Any administrative supervision of the activities of the local authorities shall normally aim only at ensuring compliance with the law and with constitutional principles. Administrative supervision may however be exercised with regard to expediency by higher-level authorities in respect of tasks the execution of which is delegated to local authorities.


Consult reply indicated at article 7.1

Article 8.3
Administrative supervision of local authorities' activities - Article ratified

Administrative supervision of local authorities shall be exercised in such a way as to ensure that the intervention of the controlling authority is kept in proportion to the importance of the interests which it is intended to protect.


Consult reply indicated at article 7.1

Article 9.1
Financial resources of local authorities - Article ratified

Local authorities shall be entitled, within national economic policy, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers.


As a longstanding effect of the world economic and financial crisis, it is usual nowadays almost in every member state that financing is the most crucial part of the local government system. And so it is in Germany too. During the visit, the current system of local finance was heavily criticized by some mayors and councillors. As one of them claimed, the existing system undermines the financial stability of municipalities. Some of them held that the current tendencies in local government finance are unsustainable.

 

The Congress delegation has become aware of the danger the indebtedness of a number of municipalities represents. Although the total deficit of the whole local government sector has been below of that of the other levels of government, it seems vital to stop the trend towards debt accumulation. The world economic and financial crisis contributed naturally to this process, narrowing not only the local tax revenue base, but also reducing the capital resources of local authorities. The social cost of the economic depression has also increased the financial burdens of local governments, as the rising costs of unemployment and social services have burdened local budgets. Although these problems, because of the significant regional disparities, have affected local authorities in different ways, a growing number of municipalities are now in a serious fiscal situation.

 

The 1999 report of the Congress had taken note of similar problems and difficulties. It might therefore be interesting to see what kinds of recommendations were adopted on the basis of that report and how those proposals were followed and implemented.

 

In relation to Article 9 para. 1 of the Charter, the Congress recommended that the federal authorities consider reforming local taxation with two aims: firstly, to restore strong local taxation in application of Article 28 (2) of the Constitution, particularly bolstering those local taxes the rate of which can still be set by local authorities, and, secondly, to revise the arrangements for the transfer of resources for compulsory spending linked to the implementation of federal and Land legislation. In addition, the Congress encouraged an extended financial contribution from the federal government to strengthen local finances. It was suggested to examine the possibility of introducing the principle of concomitance at federal level, as well as a mechanism to evaluate the actual costs incurred through implementation of federal legislation at local level. The German authorities were invited to consider the possibility of federal financial participation in those welfare services which require nation-wide harmonisation, with local authorities and the Länder taking responsibility only for supplementary local or regional services.

 

As to the reform of local taxation, the German authorities chose another way to strengthen the financial capacity of local governments, through two reforms of federal−Land relations, in 2006 and 2009. These changes did not establish new local taxes in a strict sense, the rate of which the local councils could decide themselves. Rather, the major direction of these measures was to stabilise or raise the share of local authorities in tax revenues, imposed both at federal or Land levels. In fact, this progress is not in contrast with the particular Congress recommendation, since in the case of business and land taxes, local authorities have, within the limits set by federal law, the power to set the rate of the tax (Hebesatzrecht). Similarly, the direct role of the Federation in local government finance has not been strengthened; to the contrary, it has been weakened. As we saw above, the Federation is no longer empowered to transfer mandatory tasks directly to local authorities or to finance them, since the constitutional amendment of 2006.

 

The Congress also recommended the setting-up of an Institutional Committee which brings together the representatives of the Bundestag and the Bundesrat and the representatives of municipalities, towns and Landkreise to review local authorities’ financial situation, to propose new ways of improving it and to assess the situation on a permanent basis. An additional proposal was that the Committee examine the possibility of the introduction of the principle of concomitance at federal level as well as a mechanism for the evaluation of the actual costs incurred through implementation of federal legislation at local level.

 

In line with the former recommendation, in 2010, the federal government set up the Municipality Finance Commission to elaborate proposals to restructure local government finance. The Commission was composed of the representatives of the federal and Land governments and of the national local government associations. The key areas of the Commission’s activity were the rationalisation of the tasks and powers of local authorities, reconsideration of the relevant “standards”, the review of the role and position of local government interests in the legislative process, and the replacement of the business tax in local budgets. While the Commission was able to make proposals in the first two issues, no agreement had been reached on business tax revenues when it ended its work in June 2011.

 

The proposal to abolish the business tax was initiated by the federal government. The major argument for this idea was the need to provide incentives for the economy in order to promote economic recovery. Moreover, the business tax revenue was said to be too susceptible to short-term economic trends, which, during an economic recession, might endanger the financial balance of local authorities. The Congress delegation found that, in contrast to the leading representatives of the Federation, all local politicians and officials the rapporteurs met with during the visit rejected the federal government plan to abolish the business tax. They argued that any other proposed tax would yield less revenue for municipalities than the business tax, and would shift the burden from the economic sector to the local citizens. Business tax is an important link between the municipalities and local enterprises, providing means and instruments for local authorities to encourage local investments. This means that until 2014, which is during the current mandate of the federal parliament, no change should be expected in this field.

 

The Congress recommendation relating to the recognition of the principle of concomitant financing of transferred tasks has not been followed; the opposite has prevailed. Since the federal reform of 2006, the federal government has not been allowed to confer tasks directly on local authorities. Nevertheless, the principle of adequacy in local government finance is one of the guidelines of the financial equalisation in the whole country.

 

In relation to Article 9 para. 2, it was recommended that all Länder introduce in their constitutions provisions relating to the principle of concomitance, which was entrenched in only some Land constitutions. The expectation was that provisions for compensation which is “corresponding” or “appropriate” to the new tasks delegated to local authorities would be made explicit. At the same time, the Congress emphasised that the introduction of the principle of concomitance should not lead to a decrease in financial equalisation transfers to weaker municipalities.

 

This recommendation has been fully accepted and implemented, as the principle of concomitant financing for covering costs of tasks delegated by Land governments to local authorities. The relevant Land constitutions now guarantee local governments to obtain adequate financial means “at the same time” or “without delay” with the delegation of the tasks and functions. Nevertheless, the practice of the implementation of this principle was criticised by some interlocutors the delegation met, who claimed that, despite this constitutional guarantee, “additional statutory tasks are consistently transferred to municipalities without sufficient financing”. Recent examples of this shortcoming is the financing of the maintenance of kindergartens for children under the age of three, or the North Rhine Westphalia Land government’s project to provide “social tickets” for public transport to people in need, where the continuation of the programme is financially uncertain. The rapporteurs are of the opinion that while the concommittance principle has really been transplanted into Land constitutions, as recommended by the Congress in 1999, further guarantees to ensure the effective implementation of the principle – apart from some sporadic statutory regulations in some Länder − have not been established by the Länder. Under such circumstances, there is a risk for this achievement to become a dead letter without any real effect to secure the financial balance of local authorities. Thus, the principle cannot prevent the central government from transferring national financial burdens to local authorities.

 

With reference to Article 9 para. 3, the Congress recommended that federal and Land authorities consolidate the financial independence of local authorities and proposed some particular ways to do so: Firstly, to avoid any infringements of municipalities’ right to set the rates of their own taxes, especially in the context of the proposed reform of business tax, which might be replaced by proportions of VAT. Secondly, to restore minor local excise taxes, where they were greatly reduced in number. Then, to introduce, as allowed under Article 106 (5) of the federal Constitution, the provision that local authorities may take a higher proportion of income tax, and, finally, to amend the federal Constitution to make it possible for a local tax for the benefit of Landkreise to be introduced, so as to remove the relevant reservation expressed by Germany at the time of the ratification in relation to Article 9 para. 3 of the Charter.

 

All these recommendations were set to strengthen local governments’ financial capacity and autonomy. The redistribution of tax revenues between the levels of government has only slightly changed in the recent years.

 

According to the Charter, local resources must be sufficiently diversified to enable local authorities to keep pace (as far as practically possible) with the real evolution of the cost of carrying out their tasks. The self-evident intention of this principle is not only to enable local authorities to cover the rising costs of public service delivery, but also to secure some room to manoeuvre for them. Needless to say that the world economic and financial crisis beginning in 2008 has affected the financial strength of local authorities in a negative way. It was one of the reasons for setting up a committee for preparing proposals on the restructuring of local government finance with the participation of the federal government and all interested parties.

 

As to Article 9 para. 6, Recommendation 64 proposed that the Länder, which pursue the policy of special funds in excessive numbers, convert at least some of these into general investment grants for local authorities. This recommendation has not been followed; the total share of general (block) grants has not changed significantly. Conversely, an opposite trend has more chance to prevail, because nowadays Länder governments seem to be more willing to provide additional resources as special or subject-specific grants for municipalities.

 

In relation to Article 9 para. 8 of the Charter, Recommendation 64 suggested that the federal authorities and the Länder ease borrowing limits, especially at the time when numerous German local authorities were facing a local financing crisis. Paradoxically, as the overall financial situation has worsened in recent years, the significance of curtailing and limiting borrowing and establishing a debt ceiling (Schuldenbremse) in order to break and reduce indebtedness, has grown. The emergence of debt management funds in some Länder can provide effective financial assistance for local authorities, and is a step in the right direction in so far as it does not endanger the ultimate financial autonomy of the local authorities.

 

Article 9.2
Financial resources of local authorities - Article ratified

Local authorities' financial resources shall be commensurate with the responsibilities provided for by the constitution and the law.


Consult reply indicated at article 9.1

Article 9.3
Financial resources of local authorities - Non ratified

Part at least of the financial resources of local authorities shall derive from local taxes and charges of which, within the limits of statute, they have the power to determine the rate.


Consult reply indicated at article 9.1

Article 9.4
Financial resources of local authorities - Article ratified

The financial systems on which resources available to local authorities are based shall be of a sufficiently diversified and buoyant nature to enable them to keep pace as far as practically possible with the real evolution of the cost of carrying out their tasks.


Consult reply indicated at article 9.1

Article 9.5
Financial resources of local authorities - Article ratified

The protection of financially weaker local authorities calls for the institution of financial equalisation procedures or equivalent measures which are designed to correct the effects of the unequal distribution of potential sources of finance and of the financial burden they must support. Such procedures or measures shall not diminish the discretion local authorities may exercise within their own sphere of responsibility.


Consult reply indicated at article 9.1

Article 9.6
Financial resources of local authorities - Article ratified

Local authorities shall be consulted, in an appropriate manner, on the way in which redistributed resources are to be allocated to them.


Consult reply indicated at article 9.1

Article 9.7
Financial resources of local authorities - Article ratified

As far as possible, grants to local authorities shall not be earmarked for the financing of specific projects. The provision of grants shall not remove the basic freedom of local authorities to exercise policy discretion within their own jurisdiction.


Consult reply indicated at article 9.1

Article 9.8
Financial resources of local authorities - Article ratified

For the purpose of borrowing for capital investment, local authorities shall have access to the national capital market within the limits of the law.


Consult reply indicated at article 9.1

Article 10.1
Local authorities' right to associate - Article ratified

Local authorities shall be entitled, in exercising their powers, to co-operate and, within the framework of the law, to form consortia with other local authorities in order to carry out tasks of common interest.


The Charter requests the signatory countries to provide the right for local authorities to cooperate and, within the framework of the law, to form consortia with other local authorities in order to carry out tasks of common interest. According to this requirement, each state has to recognise the entitlement of local authorities to belong to an association for the protection and promotion of their common interests and to belong to an international association of local authorities. In accordance with this principle, the federal Basic Law of Germany declares that “[w]ithin the limits of their functions designated by a law, associations of municipalities shall also have the right of self-government according to the laws”, which is almost the repetition of the Charter’s relating rule.

 

Generally, the view of local government associations is listened to at both the federal and Land level in the decision-making process of law-makers. The representatives of the associations recognise that consultation on key issues affecting local government interests is in practice. Notably, these procedures are less formalised, and the participatory rights of local government associations are not entrenched in standing orders of the Bundesrat, and the Land legislatures.

 

The Congress delegation heard some criticism relating to legislative procedures, which provide only poorly conceived forms of involvement for local government interests. Strictly speaking, local government associations have hardly any institutionalised participatory rights in law-making processes; they express their views mostly on a customary basis. Only in some Länder are the associations formally involved in the law-making process. For example, the constitution of Lower Saxony prescribes that they have to be heard prior to any regulation by law or ordinance concerning municipalities or counties. The idea to establish a special chamber (Kommunalkammer) alongside Land legislature, which could be a forum for representing municipal interests, has been discussed, but no Land has decided to set up such a body yet.

 

Frequently, federal legislation is seen as the crucial area for local government interest, and the Länder seem to vindicate the role of representing them against the federal government. However, the core issues are discussed and decided by the respective Land governments, so any consultation between central and local governments has to take place at that level.

 

Local authorities must have also the right to legal protection of their constitutionally and legally recognised rights and autonomy. For this purpose, they should have the right of recourse to a judicial remedy in order to secure the free exercise of their powers and respect for such principles of local self-government as these to be enshrined in the constitution or domestic legislation.

 

The major form of this right is the constitutional complaint, which provides the local authorities with a means to turn to the constitutional court of the Land to repeal Land laws and statutory regulations that violate their constitutional or legal rights. The Congress delegation had the opportunity to ascertain at the constitutional courts of Baden-Württemberg and Brandenburg that this is a living practice and that municipalities do use this instrument. Apparently, local authorities usually appeal to the Land-level constitutional courts in two types of constitutional controversies: sometimes they look for remedies against changes in municipal boundaries, and, more recently and frequently, in relation to local finances.

 

Article 10.2
Local authorities' right to associate - Article ratified

The entitlement of local authorities to belong to an association for the protection and promotion of their common interests and to belong to an international association of local authorities shall be recognised in each State.


Consult reply indicated at article 10.1

Article 10.3
Local authorities' right to associate - Article ratified

Local authorities shall be entitled, under such conditions as may be provided for by the law, to co-operate with their counterparts in other States.


Consult reply indicated at article 10.1

Article 11
Legal protection of local selfgovernment - Article ratified

Local authorities shall have the right of recourse to a judicial remedy in order to secure free exercise of their powers and respect for such principles of local self-government as are enshrined in the constitution or domestic legislation.


Consult reply indicated at article 10.1

ACCESSION

to the Council of Europe

RATIFICATION

of the European Charter of Local Self-Government

CONSTITUTION | NATIONAL LEGISLATION

Germany recognises, both in its federal and regional (Länder) constitutions, the right to self-government  of municipalities, setting a high standard for the protection of local authorities.



29Ratified provision(s)
0Provision(s) with reservation(s)
1 Unratified Provision(s)
28Compliant Provision(s)
0Partially Compliant Provision(s)
1Non-compliant Article