Abstract
In response to the budgetary problems of local government in Germany, some federal states (Länder) have established bailout funds for their highly indebted local authorities. These schemes commit local governments, on a contractual basis, to strengthen their own consolidation efforts in return for fiscal aid. The ambitious aim is to reduce short-term borrowing considerably or to eliminate annual deficits completely.This article provides an overview of the structure of the schemes with respect to the amounts and sources of funding as well as the conditions of participation and potential sanctions. Furthermore, this contribution explains the motives of the governments of the federal states to establish these schemes.
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