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Saarbrucken is the capital of Saarland, the smallest German state that is not also a city, Source: Depositphotos

Saarland’s 3-billion-euro sustainable transformation debt could burden taxpayers until 2075

Saarland’s 3-billion-euro sustainable transformation debt could burden taxpayers until 2075

Officials in Germany's second poorest state say this is the only way to keep up with the national green agenda

Officials in Saarland, one of the poorest states in Germany, announced their intention to set up a 3-billion-euro transformation fund. The idea came after last week the state’s Prime Minister, Anke Rehlinger, and the Minister of Finance, Jakob von Weizsäcker, went to Berlin to talk to the German Prime Minister Olaf Scholz and to ask for help with their sustainable energy transition.

Indeed, the Saarland Prime Minister explained that the rapid transition towards sustainable energy by 2045 was a herculean feat for her state in particular. She pointed out that with the war in Ukraine and the rapid break with natural gas Germany is pushing for, decarbonising the state would be practically impossible.

The 3-billion-euro debt would be used up by the year 2035, however, the local government say that they would not be able to pay it back until 2075. Nevertheless, they insist that this is a crucial source of investment for the sustainable transition of the state.  

Long-term debt for long-term gains

Today, Rehlinger and Weizsäcker published an article in the Frankfurter Allgemeine, outlining their idea for creating a sort-of debt fund of 3 billion euros. The funds would be used until 2035 with the aim of investing in the state’s energy transition, especially in industry, job retention, job creation and energy.

This is because, as state Prime Minister Rehlinger put it, Saarland cannot afford to take part in a lot of EU and German Federal funding, because they require a portion of the investment to be provided by the local government.

With the transformation fund, the state would be able to take on more development projects and catch up to other, wealthier German states and regions. As Rehlinger put it, Saarland must not be left behind.

Saarland’s precarious position

Saarland was the state with the second lowest GDP in Germany in 2021, after the city of Bremen, according to the German Federal Statistical Office. It contributes only about 1.2% of Germany’s total GDP. Additionally, it has an economy centred around coal, iron and steel production and agriculture, which are sectors all heavily affected by the sustainability transition.

This is why local authorities need to figure out how to initiate a strong sustainability transition, or the whole state risks losing jobs in industries that are rapidly approaching redundancy if they do not decarbonise.

Authorities also pointed out that such a large public debt would burden the local administration and the taxpayers a lot, as they wouldn't be able to pay it back before 2075.

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