The impending collapse of German municipal financesis due to rising expenditure, particularly on services such as youth welfare, integration support and care assistance. In accordance with the principle of causal connectivity – ‘who orders, pays’ – there are frequent calls for better federal funding of these municipal services, which are determined at central government level. In a new FiFo Discussion Paper, Michael Thöne examines solutions based on the ‘who orders, pays’ principle and on the principle of ‘who implements, pays’. As neither promises a sustainable solution, he recommends considering the complete centralisation of these services. Shifting the responsibility for implementation upwards too would, in practice, be significantly less demanding than it appears at first glance.

What role do sound local government finances play in a municipality’s ability to provide affordable housing? This is a highly topical issue in numerous countries worldwide. The United Nations Human Settlements Programme (UN-Habitat) and the Canada Mortgage and Housing Corporation (CMHC) have launched an international research project on this topic. Germany is among the first countries to be studied. FiFo Director Michael Thöne said: “Thank you very much for the honour of being the first interviewee worldwide for this important new project. I wish you every success and look forward to more of these transatlantic exchanges”.

The bar is set high for a future-proof structural and regional policy. On behalf of the Federal Environment Agency, FiFo Köln, together with Difu and the Öko-Institut, is investigating the extent to which support programmes within the Pan-German Funding System (GFS) are already striving for an ecologically sustainable, forward-looking and transformation-oriented structural policy. Fourteen programmes were analysed, including the Joint Task ‘Improvement of the Regional Economic Structure’ (GRW). The comprehensive interim report, which has now been published, provides the centrepiece of the empirical analysis. The results show that, whilst relevant approaches do exist, they are often not implemented systematically.

Today, public budgets must do more than simply allocate funds – they must shape the future. In the face of the climate crisis, demographic change and growing pressure to deliver results, mere resource allocation is no longer enough; impact is needed. The newly published UBA Report 36/2026 on the FiFo project demonstrates how green budgeting offers a modern, impact-oriented approach to budgetary management whilst also serving as a tool for environmental and climate protection. Drawing on international experience, the report develops actionable approaches for Germany – for a sustainable fiscal policy that provides targeted governance and delivers societal impact.

Too many young people fail to find a vocational training place. Since last year, companies in Bremen are required to pay a training levy to counteract this problem. These funds will be used to financially reward companies that provide vocational training. The Berlin state government has also decided to introduce such a training levy. However, the reforms are controversial. In the current issue of the „Wirtschaftsdienst“, FiFo researcher Eric Schuß discusses the pros and cons of such a levy and explains in which cases it can be successful and when not.

In times of tight budgets, local authorities need to rely on a fair and legally robust fiscal equalisation system. FiFo Köln, in cooperation with Professor Thomas Döring (sofia Darmstadt), has evaluated vertical and horizontal equalisation in the state of Brandenburg. Among the many findings of the study, one empirical observation stands out: The traditional 'Einwohnerveredelung' approach, in which fiscal needs increase solely according to city size – a Prussian invention –, is no longer a viable solution for Brandenburg. An evidence-based fiscal equalisation system that directly addresses municipal tasks does this crucial job drastically better. The study is now available as FiFo Report 39.

Public water management is the neglected stepchild of the current investment debate – its needs are enormous, yet it is frequently overlooked. At the request of the Enquete Commission ‘Water in Times of Climate Crisis’ of the North Rhine-Westphalian state parliament, FiFo and GWS Osnabrück examined the requirements and financing instruments for resilient water management in North Rhine-Westphalia. The study, now published as FiFo Report 38, combines macroeconomic simulations with the design of economic instruments. Among other recommendations, we suggest significantly raising water withdrawal fees in North Rhine-Westphalia and redesigning the wastewater levy. Furthermore, improvements are needed to the market for insurance against natural hazards.

Universities are important drivers of growth and innovation in a region. Graduates of universities of applied sciences in particular bring scientific expertise and application-oriented practical knowledge to companies. This can also improve the productivity and wages of workers without academic or vocational training. FiFo researcher Eric Schuß has demonstrated this for a wave of Bavarian university foundings. The study has now been published by the renowned journal Empirical Economics. 

Germany is embarking on a race to catch up on its neglected infrastructure. A debt package of 500 billion euros provides the necessary financial foundation. However, having a lot of money is only the first step. Spending it successfully — i.e. effectively, quickly, and in a targeted manner — is the more difficult task. In a short report for the Heinrich Böll Foundation, Michael Thöne examines the biggest obstacles to implementation, suggests solutions and outlines what we need to change – including ourselves. The Handelsblatt reports. Link to the study and to the online event presenting the study on 9 December 2025 is available.