Saarland and Bremen: Investments now possible thanks to the debt brake!

Saarland and Bremen: Investments now possible thanks to the debt brake!

On July 23, 2025, the Federal Cabinet decided on a decisive change to the Redevelopment Aid Act, which has a particular impact on the financial situation of the states of Bremen and Saarland. In the future, these two federal states, which have each received 400 million euros in additional funding from the federal budget over several years, will benefit from easier access to loans. These measures are linked to conditions such as proof of fiscal consolidation and measures to strengthen the economy. Deutschlandfunk reports that the debt brake for the federal states has been relaxed and they are now allowed to take out loans of up to 0.35 percent of their gross domestic product per year.

This regulation was initially excluded for Bremen and Saarland, but Finance Minister Lars Klingbeil emphasizes the need to invest more in infrastructure, education, digitalization and healthcare. The bill, as published on the website of the Federal Ministry of Finance described is a further step to give the states and municipalities more scope for action. This is happening with regard to a planned structural component that was set out in the collective agreement of July 2, 2025 and makes greater financing of future expenses possible.

Impact on municipalities

One of the crucial points is that the change in the law encourages all federal states to invest more in basic infrastructure. Current problems, such as unpunctual trains and dilapidated schools, are difficult to ignore. The Federal Agency for Civic Education describes that Germany has a significant investment backlog, which will require around 600 billion euros in additional investments in the coming years. Additionally, a survey shows a decline in satisfaction with infrastructure, falling from 54% in 2016 to just 35% in 2024.

The new regulations that apply to Bremen and Saarland are intended to help address these grievances. This also clears the way for the battered infrastructure in these federal states. Klingbeil emphasizes the importance of investments for the future ability of states and municipalities to act in order to meet the challenges of demographic changes and age structure.

A look into the future

Old municipal debts are another “shadow ghost” in the financial situation of many cities and municipalities. The federal government is aiming for a comprehensive solution to this problem. This is reflected, among other things, in the existing investment package, which provides 100 billion euros specifically for areas such as civil protection, transport infrastructure and digital education. The need for investment is not small - the Federation of German Industries estimates that at least 400 billion euros will be missing over the next ten years.

The changes to the Redevelopment Aid Act represent a further step in a series of reforms aimed at expanding the financial leeway of the federal states and thus driving forward vital investments in infrastructure. Time is of the essence and the signs point to action if Germany wants to meet the challenges of the next decade.