Berlin, Germany (Weltexpress). Seriously, is Berlin broke again? When isn’t it? But it only really hits home when you look beyond Germany’s borders and consider a city like Moscow … even if Berlin is only historically to blame for the root cause of its woes.
On Tuesday, Berlin’s Finance Senator once again announced a strict consolidation programme for the period from 2026 to 2030. It’s actually surprising that this even makes the headlines anymore – over the last 30 years, Berlin has only been free of austerity measures between 2020 and 2024, and usually the only news is something that isn’t already common knowledge.
After all, the 2026/27 two-year budget has long since been approved and is public knowledge, and it already includes net new borrowing of 4 billion for 2026 and 3.91 billion for 2027 (against a total budget of 32.5 billion and 33.5 billion respectively) – the only new information provided by Finance Senator Stefan Evers was that this situation will not improve in the coming years. “The economy is sluggish, and the financial burdens arising from federal transfer payments remain high.”
What is it that is having such an impact? To a large extent, these are costs caused by high rents: housing benefit, half of which is paid by the federal states; subsidies for social housing, which are borne entirely by the states; and the costs of accommodation for recipients of basic income support (including basic income support for the elderly). The costs for asylum seekers are borne by the federal states to the extent that they are not covered by the flat-rate payment from the federal government – the federal government pays 625 euros per person per month, which is sufficient for accommodation at best …
However, this is a problem faced by all local authorities and all federal states. And particularly where rents are a factor, Berlin is by no means the hardest hit. When Evers complains, he is doing so for the wrong reason. For it is primarily on the revenue side that Berlin is in a poor position.
This becomes clear when one compares Berlin with Moscow. Admittedly, Moscow has at least 3.42 times as many inhabitants, but with the equivalent of 447 billion roubles – roughly 4.4 billion euros – it has a comparable deficit this year. Unlike Berlin, however, this is set to fall again in the coming years. Half of the city’s budget goes on social spending; but not on social housing. Numerous high-rise blocks are being built in Moscow, and in order for these to be permitted in the first place, investors must, on the one hand, pay the city for the building rights and, on the other, construct between 20 and 80 per cent of the units as social housing – which is not subject to a temporary social housing obligation but is transferred into the ownership of the new residents. The entire housing problem is thus resolved without affecting the budget at all.
Incidentally, healthcare costs also weigh heavily on the Moscow budget – alongside the construction and renovation costs for polyclinics, there are also subsidies for staff working there and funding for free or subsidised medicines dispensed through the polyclinics.
The difference between the two cities becomes truly striking when one looks at investment: Evers praises himself because the investment ratio stands at 13.5 per cent; a level that is, however, only achieved because new debt is being taken on and because an additional 307 million euros per year comes from the federal government, from the special fund (i.e. the debt pot) for infrastructure and climate neutrality. Moscow’s investment ratio stands at 47 per cent of the total budget. This makes the city itself a formidable economic driver.
This becomes tangible when, for example, the figures are broken down by metro passengers. Moscow invests 3.60 euros per passenger in the construction and expansion of the metro alone (that is 2.2 billion per year). Berlin, with its 554 million passengers a year, subsidises its underground system by a mere 0.50 euros per passenger. The total annual expenditure borne by the city of Moscow per passenger is 57 euros; in Berlin, it is 1.25. It is hardly surprising, then, that the difference is immediately apparent the moment you step into the station.
Moscow’s largest source of revenue is income tax, at 2.692 trillion roubles (29.6 billion euros); Berlin’s largest source of revenue is VAT, at around 9.4 billion. In addition, Moscow also collects taxes on the profits of corporations based in the city, which generate a further 1.84 trillion roubles. The second-largest source of revenue in Berlin is payroll tax, at 5.8 billion. Berlin collects only 1.1 billion in corporation tax, and 3.15 billion in trade tax (which is collected via the districts); together, these two taxes levied on corporate profits therefore amount to less than payroll tax alone.
However, we should be honest. When it comes to revenue, Berlin is still paying for the defeat of Hitler’s fascism. Why? Because its financial situation would be brilliant if all the companies now listed on the DAX that were based in Berlin in 1945 were still there. Siemens, Allianz, Deutsche Bank, Commerzbank and Lufthansa – suddenly, Berlin could finance itself to over 90 per cent, as is currently the case in Moscow. But contrary to expectations in 1990, the exodus from Berlin was never followed by a return. Thus, Berlin remained a capital city that is constantly reliant on subsidies and never has enough financial leeway to bring its infrastructure up to even an average standard, let alone to shine a little as a capital city.
This is also evident in the share of industry: in Berlin, only 5–6 per cent of gross domestic product is generated by industry; in Moscow the figure is 16–18 per cent (and in Munich, which has ‘inherited’ a large proportion of the former Berlin-based corporations, it is at least 12–14 per cent). That makes it difficult to really get back on its feet.
But in the long run, even catchphrases like the famous ‘poor but sexy’ are of no help. Certainly not when the rest of the country increasingly regards subsidy-propped, bloated Berlin as a haven for madmen, home to a federal government that amuses itself by tormenting its citizens, be it with cash handouts to Ukraine or yet another ‘proletarian tax’, this time on sugary drinks (that might change if the lactose in Coke were also subject to this tax). Perhaps that is the real reason why Berlin’s state and federal politicians should not travel to Moscow – it would make them think. And above all, it would become clear to them that they should keep their hands off attempts to play at war. After all, they haven’t yet come to terms with the consequences of the last one.
