German Federalism: A reform that misses its mark

Early in the present decade, political actors at the national and regional levels finally seemed to agree: if government at both levels was to remain effective, Germany‘s system of federalism needed to be reformed. Their objective was to reduce the number of federal laws requiring approval by the upper house of the federal parliament, and to increase the range of issues to be decided autonomously by state parliaments. But by the end of the first reform stage, not much had been achieved. And according to the viewpoint of Fritz W. Scharpf, Emeritus Director at the Max Planck Institute for the Study of Societies, nor will the second stage, which involves restructuring the financial affairs of the Bund (the federation) and the Länder (the states), deliver the desired “disentanglement.” Here, he analyzes the faulty approach that defeated the objectives of the first stage of reforms.

The idea of Gestaltungsföderalismus (creative fed­eralism)

In the past, the governments of the Länder were willing participants in a development that extended the legislative powers of the Bund at the expense of the Länder parliaments, while at the same time also broadening the rights of the Bundesrat. The reform of the federal system was intended to reverse this trend. There were economic reasons for this: with the completion of the single European market, it was reasonable to assume that the uniform regulations required in the interests of the economy would no longer be formulated at a national, but instead at a European level, while in the competition between European regions, regulations with a regional bias might now be more advantageous than standardized federal laws.

More important, however, were the political interests of the powerful southern and western Länder, which, after German reunification, increasingly found themselves opposed by a structural majority of economically weaker Länder in the Bundesrat. Their prime ministers could still make political capital out of their roles in the Bundesrat, but there were few advantages to be gained for their own regions.

Under these conditions, their interest grew in the idea of Wettbewerbsföderalismus (competitive federalism) – the liberal opposite of the previously accepted self-description of “cooperative federalism”. But since the concept was attacked as a repudiation of the solidarity among the Länder, it was replaced in the Commission’s deliberations by Gestaltungsföderalismus (creative fed­eralism) – a formula that could be presented as being in the common interest of all the Länder.

In May 2004, the prime ministers agreed on a common position paper in which they called for comprehensive legislative powers covering all aspects of regional life, from public welfare, active labor market policy and environmental law to regional economic policy. They also wanted the Bund to withdraw entirely from education policy “from child care centers to post-doctoral degrees.” However, behind this common front lay some grave conflicts of interest between the Länder. For instance, the original demand that the Länder should obtain legislative powers over their own tax revenues had to be deleted from the statement.

As was to be expected, the red-green government had little sympathy for the demands raised in the position paper. And since the Länder were not willing to reduce their Bundesrat veto in return, it would have been reasonable to conclude from an analysis of the positions of the two sides in late summer 2004 that the reform program was destined for failure. Nevertheless, in the remaining months, a serious last-ditch attempt almost succeeded to reach agreement on a compromise package – which, however, was due less to the bargaining skills of the negotiators than to intervention by the Federal Constitutional Court. The judgment handed down by the Court on July 27, 2004 on the subject of junior professorships had undermined the constitutional basis for much of the legislative competence of the Bund and thereby radically weakened the latter’s negotiating position.

Even though the Bund subsequently offered to transfer competence to the Länder on more than 20 issues, the latter initially allowed the reform of the federal system to collapse in December 2004, since the offer did not include competence over all aspects of education. However, once the incoming Grand Coalition government, under the powerful influence of the prime ministers of the Länder, was willing to make this concession as well, a negotiated settlement was reached in the summer of 2006.

It was clear that, under these circumstances, the Bund stood to gain little from the reform. But why should the outcome also be regarded as unsatisfactory from the Länder point of view? The latter had originally demanded comprehensive responsibility for the regional aspects of economic, social and environmental policy. Instead, they received a number of narrowly circumscribed individual competencies, such as the right to regulate store opening hours, restaurants and amusement arcades, local noise levels and nursing and retirement homes.

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