The reform of Germany’s federal system
Overall, the federal system of the Federal Republic of Germany has proven itself. However, in order to make the system more effective, room for improvement was found in certain areas described as follows by the Federal Chancellor and the minister-presidents of the 16 German states (Länder) in their decision of 14 December 2005:
- strengthening federal and state legislation by dividing legislative powers more clearly and doing away with framework legislation;
- reducing barriers by redefining the requirements for Bundesrat approval of federal legislation;
- reducing the use of mixed federal–state funding and restructuring the options for federal financial assistance while emphasizing the promises made in the second solidarity package for eastern Germany;
strengthening the Basic Law’s compatibility with European legislation by revising the rules on foreign representation and adding rules on a national stability pact and responsibility for compliance with supranational law.
These reform goals are based on the agreement to modernize the federal system, part of the Coalition Agreement of 11 November 2005 and the first phase of reforming the federal structure. In addition, the governing coalition agreed to reorganize federal–state financial relations in line with the changed framework conditions within Germany and beyond, in particular for growth and labour policy, in a second phase of reform. Both reform phases, which involved major amendments to the Basic Law, have now been completed.
A. The first phase of federalism reform
The first phase of the reform officially began in October 2003, with the appointment of the Joint Bundestag–Bundesrat Commission on Modernizing the Federal System. Although all the political parties recognized the need to modernize the federal system, no reform was carried out during the legislative term from 2002 to 2005. However, based on the preliminary efforts and the Coalition Agreement, the first phase of reform was completed already in 2006 with passage of the Act Amending the Basic Law of 28 August 2006 (Federal Law Gazette I, p. 2034) and the Act Concomitant to Federalism Reform of 5 September 2006 (Federal Law Gazette I, p. 2098).
The first phase of federalism reform, which was aimed at better federal and state decision-making ability, a clearer division of responsibilities and greater efficiency in carrying out tasks, is one of the most extensive changes ever made to the Basic Law. A total of 25 articles were amended, deleted or added.
In essence, the first phase of reform covered the following areas:
- Reform of the participatory rights of the Bundesrat via a reduction in the scope of consent required from the Bundesrat pursuant to Article 84 (1) of the Basic Law and the introduction of new conditions pertaining to the requirement for consent from the Bundesrat for laws entailing substantial costs (new Article 104a (3a) of the Basic Law).
- Reform of legislative powers via the abolition of framework legislation and reorganization of the scope of concurrent legislation, reducing the purview of the clause contained in Article 72 (2) of the Basic Law which defines the requirement for legislation by the Federation, and introducing divergent legislation of the states in certain areas of legislation. This also made the Basic Law more compatible with European legislation.
- Clear designation of financial responsibility, for example by
o reducing mixed financing arrangements between the Federation and the states (new Article 91a (1), no. 1 of the Basic Law),
o strengthening regional tax autonomy (new Article 105 (2a) of the Basic Law),
o anchoring the National Stability Pact in law (new Article 109 (5) of the Basic Law), and
o clarifying the principles pertaining to the burdens to be borne by the Federation and the states in case of breaches of supranational and international obligations and the so-called Maastricht criteria (new Article 104a (6), new Article 109 (5) of the Basic Law).
- Defining Berlin as the capital of the Federal Republic of Germany in constitutional law (Article 22 (1) of the Basic Law).
B. The second phase of federalism reform
After the first phase was completed, the financial relations between the Federation and the states were also to be modernized in a second phase of reform, in order to adapt them to the changed conditions within Germany and beyond, especially for growth and labour policy. The proposed reforms were intended to give local governments greater responsibility and financial resources sufficient for their tasks.
The Joint Commission on the Modernization of Financial Relations between the Federation and the States appointed by the Bundestag and Bundesrat in spring 2007 to draft reform proposals completed its consultations on 5 March 2009 and agreed on an extensive package of proposals for specific legislative amendments. The Bundestag passed the Commission’s proposed amendments on 29 May 2009, and the Bundesrat gave its approval on 12 June 2009. The Act Amending the Basic Law entered into force on 1 August 2009, while the Act Concomitant to the Second Federalism Reform entered into force on 18 August 2009. A summary of the Commission’s decisions is available in English translation on the website of the German Bundestag, along with additional information in German.
The central element of the reform is improving constitutional limits on borrowing by the Federation and states. Such limits are crucial for ensuring sustainable budget policy for the long term, especially in view of the current financial and economic crisis and the related increase in borrowing. For more information, please refer to the website of the Federal Ministry of Finance.
Amendments in the area of administration were primarily intended to give more responsibility to territorial authorities and improve productivity by streamlining and coordinating tasks and standardizing and improving cooperation. This applies in particular to Article 91c of the Basic Law, which creates a constitutional basis for cooperation between the Federation and the states in the field of information technology and makes it possible to simplify existing IT bodies and decision-making structures and organize them more effectively. The article also gives the Federation exclusive authority to establish and operate a secure network linking up the federal and state IT networks. The IT Network Act, which was also negotiated as part of the overall package, had already been passed for this purpose. The next goal is for the State Treaty on IT, which was also negotiated in the overall package, to enter into force in April 2010 in order to be able to set up the IT Planning Council as the central body responsible for IT coordination.
The new constitutional law footing for cooperation between the Federation and the states on benchmarking in public administration, as provided for in Article 91d of the Basic Law, indicates the priority given to modernizing public administration in Germany. Benchmarking makes the results, quality and costs of administrative action more transparent and helps in identifying the best solution, thereby further improving administration. Benchmarking also has the practical effect of strengthening parliamentary oversight of government and administrative action. Benchmarking can be applied to public administration at state level, federal level and a combination of federal and state levels.