Financial shortage of the Saxon municipalities: 12 billion euros needed!

Financial shortage of the Saxon municipalities: 12 billion euros needed!

Leipzig, Deutschland - On June 5, 2025, the Saxon Cities and Community Day (SSG) and the competence center for municipal infrastructure of the Saxons of the University of Leipzig published alarming results on the financial situation of the Saxon municipalities. In a common paper, a “dramatically exhilarating financial emergency” is spoken of, which is confirmed by the latest municipal survey. This survey, in which around 130 out of 400 Saxon municipalities took part, highlights the current challenges in the municipal finances.

The causes of the tense financial situation are diverse. On the one hand, the consequences of Corona pandemic and the 2022 energy price crisis burden the expenses of the municipalities. There are also significant cost increases in the construction industry, which also put the municipal projects under pressure. At the same time, the municipalities are faced with a weak development of their income, which is reinforced by the general economic stagnation. According to the results, the municipal investment requirement in Saxony will be estimated at around 10.9 billion euros by 2028, while an additional 2.1 billion euros are estimated for maintenance measures.

investment needs and infrastructural challenges

Overall, there is an infrastructure requirement of around 12 billion euros, which underlines the urgency of measures to stabilize the municipal financial situation. The survey, which included detailed questions about investment and maintenance needs, showed that the investment activity of the Saxon municipalities is below the East German average. The reason for this is savings that were made between 2002 and 2015. Many cities and municipalities try to reduce an existing investment deficit while the construction prices continue to increase.

In order to counteract the difficult situation, it is recommended to continue the investment expenditure and reduce bureaucratic hurdles. The federal investment assets are considered a helpful component to support the municipalities. The construction industry is ready to realize additional investments without significant price increases.

draft law for local financing

As early as 2020, the Saxon cabinet had launched a draft law to finance Saxon municipalities after the tax revenue had broken down sharply as a result of the Covid 19 pandemic. The draft law, which applies in 2021 and 2022, should guarantee a broader distribution justice and the securing of municipal financial resources. Finance Minister Hartmut Vorjohann described the draft as modern and strong, whereby the amount of the general topics for the municipalities should be around 6.8 billion euros each. The state parliament should decide on the bill in spring 2021.

The results now published illustrate the need for action for the Saxon municipalities and underline the need to take suitable measures in order to ensure the municipal infrastructure and finances. These developments must also be observed closely to ensure the quality of life in the affected regions.