Greifswald in a bind: One million euros in repayment and budget freeze!

Greifswald in a bind: One million euros in repayment and budget freeze!

In Greifswald, the situation is tense: the city is forced to pay back one million euros to the state of Mecklenburg-Western Pomerania. The reason for this is the scandal surrounding the redesign of the outdoor facilities in the Ostseeviertel, which were planned between 2005 and 2012 as part of the “Urban Redevelopment East” project. The redevelopment agency responsible at the time, BauBeCon, had provided false information when applying for urban development funding, which ultimately led to a decisive ruling by the administrative court. Shortly before Christmas 2021, this decided in favor of the city of Greifswald, but massive irregularities emerged as the tests continued. In fact, construction work was already in place before the official application was submitted, which legally called the funding into question, as the Ostsee Zeitung explains.

But this is just the tip of the iceberg. The city's budget is under enormous pressure and is expected to end 2025 with a deficit of 41 million euros. Mayor Stefan Fassbinder (Alliance 90/The Greens) has imposed a budget freeze due to this financial imbalance. Income from trade tax has fallen by around 7 million euros, and the number of residents has also decreased - 3,000 fewer people than expected, as NDR reports. This all results in a shortfall of potentially €9.5 million, putting the city in an extremely precarious position.

Budget freeze and other measures

The budget freeze means that only legally or contractually obligatory expenses can be made. All expenditure will now be carefully reviewed and new projects must be deemed urgent and necessary to proceed. Financial income is declining sharply - the state's financial equalization was also reduced by around 2.5 million euros. The city of Greifswald questions whether the census results are even correct, as the negative demographics also endanger the municipality's longer-term planning.

In addition to the budget freeze, the city now also sees the need to take out a loan, which the citizens should decide. In this tense situation, the city administration has already had to lay off a senior employee in order to adjust the administrative structure and save costs.

Critical situation of municipal finances

This situation is not just a local problem. According to a report by the Bertelsmann Foundation, the finances of municipalities in Germany have collapsed across the board. Municipalities are responsible for over 50 percent of public investments, which endangers their social cohesion. The increasing expenditure on personnel and social benefits, coupled with stagnating tax revenues, makes a sustainable solution urgently needed.

Mecklenburg-Western Pomerania has one of the oldest populations in Germany, which further exacerbates the problem. This development urgently requires a reform of municipal financial equalization in order to secure the ability of cities and municipalities to act in the long term. Finance Minister Geue is already planning annual cuts of around 180 million euros in the state financial equalization, which will put further pressure on Greifswald and other municipalities.

The developments in Greifswald are an expression of the half-hearted solutions at the administrative level and illustrate the urgent need for reform in the entire municipal sector. A lot is at stake and the city will have to do everything it can to get out of this financial crisis.