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You are here: Home Life in News Focus Bailing out Berlin

18/10/2006Bailing out Berlin

Germany's capital is bankrupt and desperately in need of cash to fill its empty coffers. But will Germany’s federal states shell out for their impecunious neighbour?

Germany's capital is bankrupt and a high court is due to rule this Thursday whether it should be given a multi-billion euro bailout funded by the federal government and wealthier states in the country.

"Berlin is poor but sexy," is how the city's mayor, Klaus Wowereit, tries to put a positive spin on the staggering 60 billion euro (75 billion dollar) debt saddling the metropole.

Hey, what's wrong with being poor but sexy?

Wowereit, who is famous for rubbing shoulders with the rich and famous in Berlin's social scene, says the city cannot repay the debt by itself and has invoked a constitutional solidarity clause in a bid to win a bailout ruling from Germany's highest court.

To put the depth of Berlin's problems into global perspective, consider that the city has just 3.4 million people. Argentina, which defaulted on 80 billion dollars of its 150-billion-dollar debt in 2001, has a population of 40 million.


Tired of handouts

The federal government and most of Germany's 16 federal states are furious over the Berlin government's move.

Wealthy states including Bavaria, Baden-Wuerttemberg as well as eastern Saxony state are now threatening to dismantle what is known as the "Laenderfinanzausgleich" system which pumps funds from rich regions to poorer parts of Germany.

"If worst comes to worst, the badly-run states in Germany will get billions in aid while the federal government seeks to skim off funds from the better run states," said the Frankfurter Allgemeine Zeitung newspaper.

The prosperous states are demanding that if Berlin wins the court case they should be able to appoint a "forced adminstration" for the city and parachute in a budget czar to get spending under control.

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