German Chancellor Friedrich Merz speaks during the North Rhine-Westphalia federal state party convention of the Christian Democratic Union (CDU), in Bonn, Germany, August 30, 2025. REUTERS/Thilo Schmuelgen
BONN, Germany (Reuters) -Germany's federal government will begin helping municipalities to pay down old debts from January 1, 2026, Chancellor Friedrich Merz said on Saturday, two weeks before his government faces its first electoral test since taking office.
Merz made the pledge at the party conference of his Christian Democrats, or CDU, in the German state of North Rhine-Westphalia which is holding local elections on September 14, four months after his government came into power.
State and municipal leaders say the federal government has imposed extra welfare costs on municipalities without providing them with the necessary funds to finance them.
In NRW, Germany's most populous state and a bellwether for national politics, the municipal debts were around 55.4 billion euros ($64.86 billion) at the end of 2024.
"We will present a draft law on municipal old debts later this year," Merz said. "We want to bring it into force on January 1, 2026."
This would only provide modest help for municipalities, however, he said, adding that, together with Germany's 16 states and the federal government, they needed to get their "ever-exploding expenditures" under control.
He also called for vigorous reforms of Germany's welfare systems, which the country could no longer afford, he said.
"We have been living beyond our means for years," he said.
While Merz's CDU is set to remain the largest force in NRW, according to state polls, the far-right Alternative for Germany could make strong gains.
No longer just an eastern protest party, the AfD has leapfrogged Merz's conservative CDU/CSU alliance in some national polls to come in first place in recent weeks.
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(Reporting by Andreas Rinke and Sarah Marsh; editing by Barbara Lewis)
