German municipal debt rose 9.9% in 2025 to €378.9 billion

Germany’s local authorities borrowed considerably more in 2025 than in the year before. Counting the funds, institutions and companies they hold stakes in, municipalities and associations of municipalities owed a combined €378.9 billion to banks and other non-public creditors at the end of 2025, the Federal Statistical Office (Destatis) said on 29 October 2026. That was 9.9% more than at the start of the year. In 2024 the increase had been 6.3%. Per resident, the debt came to €4,907.

The figures come from a model calculation by the federal and state statistical offices. It assigns to each municipality not only the debt of its core budget but also that of its extra budgets and of every public fund, institution and company in which it holds a direct or indirect stake, down to several levels of ownership. This makes municipalities comparable regardless of how many tasks they have moved out of their core budgets. Berlin, Hamburg and Bremen are not included, because the city states count as state level in the public finance statistics.

Core and extra budgets drive the increase

As in 2024, most of the increase came from the municipal budgets themselves. Debt in core budgets grew by 15.5% and in extra budgets by 14.7%. Debt held by the other entities rose by a much smaller 4.5%.

The reason shows up in day-to-day finances. In April Destatis had reported, on provisional figures, a financing deficit of €31.9 billion for municipal core and extra budgets in 2025, the largest since German reunification in 1990 and €7.1 billion more than the previous record set in 2024. Adjusted spending rose by 5.6% to €423.3 billion, while revenue grew by only 4.1% to €391.4 billion, leaving 7.5% of spending not covered by regular income.

Spending on staff rose particularly fast, by 6.8% to €113.4 billion, as did social benefits whose costs fall mainly on local authorities: integration assistance under Book IX of the Social Code rose by 11.2% to €25.2 billion, and child and youth welfare by 8.8% to €20.0 billion. Capital spending on physical assets, by contrast, grew by only 3.5% to €53.9 billion, after increases of 12.5% in 2024 and 11.9% in 2023.

Hesse at the top, Brandenburg at the bottom

Local authorities in Hesse carried the most debt at the end of 2025, at €6,763 per resident. With an increase of 7.4% they widened the gap to Saarland, at €6,408 per resident, which had held the top spot at the end of 2023. The lowest levels were in Brandenburg at €2,733, Saxony at €3,338 and Thuringia at €3,692.

Debt rose in all 13 territorial states. It grew fastest in Lower Saxony and Baden-Württemberg, followed by Schleswig-Holstein and Bavaria. The last two had also seen large increases the year before, but their debt per resident remains well below the national average. In Rhineland-Palatinate debt rose again by 8.3% after falling in 2024. Unlike in 2024, the state took over only a small volume of municipal liquidity loans in 2025 through its programme ‘Partnerschaft zur Entschuldung der Kommunen in Rheinland-Pfalz’ (partnership to reduce municipal debt). Saarland had the smallest increase; there the state continues to take over municipal cash loans under the Saarland Pact. Thuringia was the only state where the debt of municipal core budgets fell, by 5.3%.

What the figures do not show

Destatis points out that the model calculation says nothing about which debts a municipality would be legally liable for. A comparison with municipal assets is not possible, because data on the entities outside the core budgets are missing. Only debt owed to banks and other non-public creditors is counted. Apart from the core budgets, the results cannot be compared with the debt statistics compiled under EU rules.