Lower Saxony: Municipalities are sinking into debt chaos – a record of 17 billion euros!

Lower Saxony: Municipalities are sinking into debt chaos – a record of 17 billion euros!

The financial situation of Lower Saxony's municipalities is more serious than ever before. According to the current 2025 municipal report, the debt level is over 17 billion euros, a staggering increase of 2.5 billion euros compared to the previous year. This development is described as “dramatic” by the President of the Lower Saxony State Audit Office, Sandra von Klaeden. More and more municipalities are forced to take out loans to cover their ongoing obligations, while important investments are put on hold.

Municipal expenditure exceeded revenue by almost 4 billion euros in 2024. This represents the worst financial performance in the past five years and forecasts suggest that financial flexibility will continue to shrink in the coming years. One reason for this is rising personnel expenses and social benefits, while income is stagnating. Interest payments have also increased - an additional problem that is putting municipalities under pressure.

Investment backlog and demographic challenges

The local authorities' predicament is leading to an alarming investment backlog, which currently stands at 6.8 billion euros. This particularly affects schools, where around 60% of the traffic jams occur. Demographic change is causing problems for rural regions, which are losing residents while cities such as Hanover, Oldenburg and Göttingen are growing. This not only has a financial but also a social impact on the infrastructure and quality of life of the affected communities.

The situation is anything but rosy: in 2023, the municipalities in Lower Saxony had already reached a record level of around 14.9 billion euros in debt. Expenditure exceeded income by almost 1.4 billion euros, indicating a worrying development. This trend has led to some municipalities having to take out loans of over 1 billion euros for necessary investments in roads and buildings.

In a nutshell: The financial challenges

Several factors contribute to these financial difficulties: the costs of accommodating refugees due to the war in Ukraine, the increasing demands caused by climate change and the energy transition, as well as the shortage of skilled workers are just some of the challenges that municipalities have to face. Many of them have already taken out investment loans worth 13.9 billion euros, and given the unstable interest rate situation, an additional increase in these loans cannot be ruled out.

• Schuldenstand 2025: über 17 Milliarden Euro
• Investitionsstau: 6,8 Milliarden Euro
• Schuldenstand 2023: 14,9 Milliarden Euro
• Ausgaben über Einnahmen 2024: knapp 4 Milliarden Euro
• Prognosen für schwächere Steuereinnahmen in den kommenden Jahren

The Lower Saxony state government may be forced to take other action in the coming years to stabilize the situation. A reform that increases property taxes in many small and medium-sized municipalities will also be up for debate in this critical situation.

It is time for those responsible to develop a good knack for finding solutions to these pressing problems. The events in Lower Saxony are extremely revealing and could serve as a wake-up call for other federal states that face similar challenges.

For anyone who would like to find out more about the current situation and developments in Lower Saxony, here are the reports from NDR, The Lower Saxony and LRH to find.