Financing German Unity: Fiscal Conflict Resolution in a Complex Federation

Unification posed a new challenge to the Federal Republic ofGermany. Two economically different areas were united into onefederal polity. Due to the constitutional command to safeguardequivalency of living conditions throughout the republic, thefederal government as well as the "old" Länder were supposedto support the "new" Länder of East Germany. Until 1994,provisional regulations served to finance East Germany; in 1995,the new Länder were integrated on an equal footing intothe "financial constitution" of the Basic Law. Unification wasnot used for constitutional reform as had been demanded by someLand leaders. Concerning intergovernmental fiscal relations,one can speak of "budgetary adaptation" only. It was not possibleto resolve long-lasting constitutional issues together withthe challenge of unification. German unification has been, andwill be, very costly. Public debt rose from roughly 900 billionGerman marks in 1989 to more than two trillion in 1995. Theargument about burden sharing between the federation and the"old" Länder continues, and the formulas of fiscal equalizationhave been challenges by Bavaria and Baden-Württemberg.     

Economic Globalization and the Shifting Boundaries of German Federalism

As in many other nations, economic globalization underminedthe economic policymaking autonomy of the German federal government.At the same time, it prompted decentralization of other kindsof economic policymaking authority within the federal system.Thus, the Länder have assumed increased responsibilityfor regional economic adjustment through the expansion of regionaleconomic policy networks. The economic impacts of globalizationand the decentralization of economic policymaking, however,combine to promote greater disparities among the Lander. Thesedisparities exacerbate growing competition among the Länderfor investment and publicresources. This, in turn, creates deeperconflict among constituent governments that threatens to weakenfurther the problem-solving capacity of cooperative federalism.     

The West German Federal Constitutional Court as Guardian of the Federal System

The West German Federal Constitutional Court has generally actedas a guardian of the German federal system. The Court has preventedattempts by the federation to encroach upon the modest autonomyleft to the Länder. If a national solution for a problemseems indispensable, the Court favors techniques that compensatethe Länder for a loss of autonomy by granting them certainparticipation rights. Guided by that principle, the Court'sconstruction of the Basic Law has increased considerably thenumber of federal statutes that require the approval of theBunesrat. Thus the Court emphasizes today the idea of partnership.However, in a 1986 decision, the Court made clear that a certainamount of federal leadership is needed to keep the system running.In this decision, the Court reminded the federation expresslyof its responsibility for the whole.     

Forty Years of German Federalism: Past Trends and New Developments

This article traces the major developments in German federalismfrom 1949 to the present. From a system based on a concept of"dual federalism," which was different in important ways fromthe American system, German federalism became somewhat morelike the postwar American cooperative federalism. Criticismof this system in the 1970s led to various reform efforts, whichmade little headway until the 1980s and the formation of a CDU/CSU-FDPcoalition government under Chancellor Helmut Kohl. The "turnabout"promised by this government and carried out to some extent includedplans and policies to strengthen the Länder by some sortingout of functions. These efforts were successful at first, butthe federal government has oriented its policies more towardthe national arena. Financial constraints, the nationalizationof basic rights, technological concerns, and pressures by theEC have led to new tendencies toward intergovernmentalizingand centralizing the relations between the federation and Landgovernments.     

Federalism and Education Planning in the Federal Republic of Germany

In 1969 demands for greater rationality in education planninggave rise to new institutionalized forms of cooperation betweenthe federation and the Länder. Conflicts between the federaland Land governments, partisan conflicts, and financial conflictsoverlapped this cooperation. Despite the fact that the formalcapacity for dealing with conflicts had many shortcomings, ajoint general plan for education was issued in 1973 as a resultof favorable economic and political conditions. However, in1978 the federal government failed in its attempt to utilizethe dissatisfaction with the existing system of cooperationto extend its responsibilities for education. The deteriorationin economic and political conditions led to an end of effortsto formulate a general plan for education in 1982 and reducedthe scale of joint activities. Forms of educational cooperationbetween the federation and the Länder still exist, butthey no longer fulfill their original purpose. The centralizationof decisionmaking, which was originally expected, never cameinto being.     

German Federalism After Unification: The Legal/Constitutional Response

The collapse of communism in East Germany and the resultingGerman unification produced a new focus on the operation offederalism in a unified Germany and on certain reforms concerningfiscal federalism and various constitutional amendments. Theinitial decisions about financing the new Länder in theEast soon proved to be inadequate, and after much controversya new "solidarity pact" was concluded between the federal andLand governments in March 1993. To counter recent trends towardincreasing centralization, a constitutional commission proposeda number of amendments, now under consideration by the federalparliament, which would strengthen the Länder vis-à-visthe federal government. The Länder have also been concernedabout the growing interference by Brussels in their affairs.As a result of recent changes in the Basic Law, they have strengthenedtheir position in relationship to the federal government andthe European Union.     

The Foreign and European Policy of the German Lander

Although the German federal government is responsible underthe Basic Law for foreign affairs, the Länder may, undercertain circumstances, conclude treaties with the consent ofthe federation. The Länder have also become involved directlyand indirectly in other international activities. European integration,especially through the European Communities (EC), presents theLänder with new challenges. The Länder have soughtmeans to influence the federal government and the EC Commissionand Council of Ministers, in order to protect their sphere ofautonomous decisionmaking, but EC procedures and the realitiesof federal government involvement do not place the Länderin a strong negotiating position.     

Rebuilding public administration in the New German Länder: Transfer and differentiation

The rebuilding of public administration in the new German Länder can be described as a process of increasing differentiation. The new states share the common legacy of ‘democratic centralism’ and face similar reform challenges; but the analysis of the establishment of state administrations, local government reform and personnel policy reveals important differences amongst the states. West‐East institutional transfer plays a decisive role in creating effective institutions of governance in the East. However, it does not imply the imposition of a uniform West German ‘model'; rather, institutional transfer encourages administrative differentiation.     

Austria: A Federation without Federalism

Austria is an understudied case in comparative federalism. Thereare, however, interesting theoretical observations concerningthe workings of Austrian federalism. In particular, analysisof the Austrian federal system is likely to call attention tothe relationship between political institutions and the socialstructure in the study of comparative federalism. This essayseeks to expose the centralizing tendencies related to societalhomogeneity that exert broad pressures on Austria's federalsystem. Empirical evidence shows a pan-Austrian national frameworkof reference employed by political actors even when the policyareas in question are within exclusive Länder jurisdiction.Without the territorially based distinctiveness necessary tosustain a federal outlook, the Austrian federal system has movedin a centralist direction.     

European elections—Greece

This article discusses the implications for the German federal system of incorporating the new Länder of eastern Germany following German unification in 1990. It begins by examining the relationships between federation and Läander — commonly termed ‘cooperative’ federalism — which developed in the Federal Republic after its foundation. It then discusses how the integration of the new Länder in the east has added to and seriously exacerbated a range of tensions which had begun to emerge in ‘cooperative’ federalism prior to 1990, before moving on to outline the Länder contribution to the debate on reforming the federal system which was made possible under the terms of unification. This debate was, it is argued, an opportunity missed by the Länder — or, more precisely, was one they were incapable of taking ‐ to shore up and strengthen their position as an effective counterbalance to the federation in united Germany.     

Sachpolitik oder Parteipolitik?

The article analyzes the roll call voting behavior of German Länder governments in the Bundesrat from 1990 to 2005. We examine if, when, and to what extent the German Bundesrat is dominated by federal party politics rather than by an appropriate conflict of policy interest between states and state governments. We develop and apply a method to separate the effect of policy preferences and of parties’ politics on the voting behavior of Länder governments.     

Federalism and the Controversy Over the New Media in West Germany

The possibilities of expanding the television network by meansof cable and satellite service have paved the way for the Länderto determine relevant organizational structures. The newly completedState Media Treaty seems to represent a definite breakthroughin regulatory policy. The legal regulation of the new media—cableand satellite television—faces further complications,however, insofar as nine Land media laws impose different legalrequirements on the new broadcasters. Even so, differences amongthe Länder in the area of cable TV are no longer as greatas they were in the past, and a satellite agreement reachedby the Länder provides for more uniform regulation. Also,the Federal Constitutional Court's 1986 decision emphasizingthe importance of a uniform system of broadcasting and requiringdual private and public broadcasting may have settled the fundamentalpolitical dispute among the Länder over the new media.     

Financing the German Federal System in the 1980s

Public finance is a crucial issue in any federation. In thesystem of shared public financing in Germany, no unit of governmentis fiscally dependent on the other. The federal and Land governmentsshare the personal income tax, the corporation tax, and thevalue-added sales tax. Because the Bundesrat approves of theshares of these tax yields granted the federal and Land governments,the Länder are deeply involved in the public finance system.Fiscal equalization occurs both vertically and horizontally.The federal government provides the Länder with grants-in-aid,and also shares the financing of a number of "joint tasks."The Länder share their tax yields with their local governments.Fiscal transfers also take place among the richer and poorerLänder and among the municipalities within the boundariesof individual counties. Controversy exists over the shares tobe given the respective governments from the value-added taxand over fiscal equalization between the richer (South) andpoorer (North) Länder.     

The High Court and Australian Federalism

This article analyzes the constitutional role of the High Courtof Australia during its first hundred years and the effect ofthat role on the Australian federation. The High Court has acceptedas axiomatic that part of its function is the judicial reviewof legislation of both the federal and state legislatures. Itsapproach is relatively modest and "textualist." That approachhas been affected by historical changes, including Australia'sindependence from Great Britain. The decisions of the High Courthave provided a framework for the development of the Australianfederation over the last century in increasing the relativeimportance of the federal government at the cost of the stategovernments. However, those decisions are probably best viewedas reflecting, rather than creating, the changes and developmentsin the federation.     

The Federalism Debate

These papers examine current Australian federalism from the perspectives of an academic and a practitioner. Both acknowledge the opportunities arising from the current White Paper process, as well as challenges in the face of substantial cuts of proposed funding from the Commonwealth to the States. They insist upon the need for renewed commitment to the idea of federalism, and the importance of sustainable fiscal arrangements within the federation. Challenges in Reforming Australian federalism reminds us of the kind of federalism operative in Australia – concurrent, not coordinate – and develops reform proposals accordingly. Ten Steps to a Better Federation offers a range of ideas from a former state premier, drawing on his experience as both a participant at Council of Australian Government (COAG) and, later, Chair of the COAG Reform Council.     

TAX SHARING IN AUSTRALIA AND WEST GERMANY*

Abstract: Certain aspects of the new Australian tax sharing arrangements are analysed against the background of West German experiences. Emphasis is laid on Federal-State relations in outlining the basic characteristics of the German machinery and the Australian arrangements. Compared to the Australian situation, the tax sharing base in West Germany is much broader and has indeed contributed to the safeguarding of State autonomy to a large extent. On the other hand, the German States have no individual power to legislate on taxes or tax surcharges. Although tax sharing is a powerful instrument in mitigating financial imbalances in a federation, it tends to conflict with the idea of a centrally controlled stabilization and distribution policy. In Germany, tax sharing is complemented by a complex coordination machinery stabilizing joint decision making of the Federal government and the States. In areas such as demand management, financial planning and allocation policies there seems to be need for such complementary arrangements, since tax sharing alone cannot achieve sufficient coordination among the different administrative levels of a federation.     

The States, Federalism and Political Science: A Fifty-Year Appraisal

The role of the states within the Australian federation has evolved significantly over the past 50 years. So has the interpretation of that role by political scientists. Until the early 1970s, the states seemed to be declining into financial and policy subservience notwithstanding their continuing primary responsibility for the delivery of public services. They then experienced a political and policy renaissance, accompanied by a more balanced political-science appreciation of the virtues of federalism. Since the early 1990s, the states' trajectory has become more uncertain.     

Australia's New Federalism: Recipes for Marble Cakes

In July of 1990, the prime minister of Australia announced aprogram to achieve a closer partnership between the three levelsof government. His concern was the degree of bureaucratic overlapin the Australian federation and the hindrances to mobility,portability, and uniformity which made the Australian economymore balkanized than Europe post-1992. The announcement capitalizedon dissatisfaction with Australian federalism that had beengrowing in the 1970s and 1980s, and its timing coincided witha range of catalysts making the current climate favorable forchange. The new federalism unleashed a process of review andreform across some forty program or subprogram areas over aneighteen-month period with a prime objective to attain roleclarification for the three levels of government in shared functionalareas, somewhat akin to the German horizontal model of federalrole allocation. The process survived a political challengethat toppled the prime minister, aspects of the new federalismforming a key element of that challenge. Constitutional changeis also part of the agenda and already the Australian experienceholds a number of lessons for other federal systems.     

Searching for electoral irregularities in an established democracy: Applying Benford’s Law tests to Bundestag elections in Unified Germany

This article investigates electoral irregularities in the 1990 to 2005 Bundestag elections of unified Germany. Drawing on the Second Digit Benford Law (2BL) by Mebane (2006), the analysis consists of comparing the observed frequencies of numerals of candidate votes and party votes at the precinct level against the expected frequencies according to Benford’s Law. Four central findings stand out. First, there is no evidence for systematic fraud or mismanagement with regard to candidate votes from districts where fraud would be most instrumental. Second, at the state level (Bundesland), there are 51 violations in 190 tests of the party list votes. Third, East German states are not more prone to violations than Western ones. This finding refutes the notion that the East’s more recent transition to democracy poses problems in electoral management. Fourth, a strong variation in patterns of violation across Bundesländer exists: states with dominant party control are more likely to display irregularities. The article concludes by hypothesizing and exploring the notion that partisan composition of nominees involved in the counting may produce a higher likelihood of violation and be a cause of Länder variation. This may especially be the case when a party dominates in a Bundesland or opponents to the former socialist regime party are involved in the counting.