After the Second World War, the Allies set up a federal system in Germany, in order to prevent a Third World War from happening. They thought that a federation would divide Germany and reduce the influence of Prussia over the other constituents of the former Confederation of States. As a matter of fact, it is the very aim of a federation to accommodate diversity as well as unity through solidarity. The real challenge to a federal system the search for the right balance between solidarity and diversity. Germany has answered that dilemma in its Basic Law. Article 72 basically states that the Bund can legislate in the domain of concurrent legislative power every time that its action ensures that the equality of living conditions is at stake. In November 1989, the Berlin Wall fell, and the start of the fall of the Soviet Union began. The Democratic Republic of Germany (GDR) was part of that Union. But, in 1990, the two parts of Germany, the GDR and the Federal Republic of Germany (FRG) were reunited. That reunification might seem as normal today, but at that point of time, it was not so sure whether or not the eastern part would be reintegrated.
[...] To me, it is a good measure. I doubt it will be enough but it is a good start. Lately, the richer Länder's universities have started to demand tuition fees to their students. To me, it shows that the system can no longer work as it has been for so long. Richer states want to demand more taxes than poorer ones so they can improve their services. And I do not see any reason why that should not happen. Of course, the solidarity between the Länder should remain but the system has to become more competitive so that progress are made. [...]
[...] The Democratic Republic of Germany (GDR) was part of that Union. But, already in 1990, the two parts of Germany, the GDR and the Federal Republic of Germany (FRG) were reunited. Hence, it went very fast. That reunification might seem as normal today, but at that point of time, it was not so sure whether or not the eastern part would be reintegrated. During the 40 years under which the GDR was under Soviet rule, the economy had been changed to a planned one, the infrastructures deteriorated and were not improved. [...]
[...] The estimations showed that there should be million Euro less paid in 2005 in comparison to the old financial constitution. In 2005, Germany's public debt represented 67,9% of its GDP. The Gini coefficient shows how much the distribution unequal is. Used in this case, it would show how the inequalities are reduced by the financial equalisation, you can follow the modification at each stage. [...]
[...] The reality of Germany's fiscal federalism Steuerkarussell” 1. Joint taxes 2. Federation's taxes 3. Länder's taxes 4. Municipalities' taxes 5. Tranfers from the federation to the Länder and municipalities 6. Transfers from the Länder to the municipalities 7. horizontal equalisation between the Länder 8. horizontal equalisation between the municipalities 9. Allocation of the corporation tax (free translation from the original text on Wikipedia that comes with the picture “Steuerkarrusell”) After the Second World War, the Allies set up a federal system in Germany, in order to prevent a Third World War from happening. [...]
[...] The report of the German ministry of Finance of 2006 did however not support these facts. According to its data, the poor Länder come up to 99,5% of the average financial capacity after the whole process and the five richest Länder remain above 100%. Hence, I do not know how these differences were found but since I cannot redo the calculus, I will not engage in the argument. These supplementary grants to the new Länder will end with the end of that financial constitution in 2019. [...]
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