• 69 per cent of municipalities describe their financial situation as adequate or poor
• A good one fifth of municipalities is using the Special Fund for Infrastructure and Climate Neutrality already this year
• Funds are being prioritised for schools and roads

Municipal treasurers are increasingly displeased with the financial position of their municipalities. Only twelve per cent of municipalities rate their current financial position as very good were good. In 2022 that rate was eleven percentage points higher. At the same time, 69 per cent of municipal treasurers describe the financial situation of their municipality as adequate or poor; this is up from 48 per cent in 2022, followed by 60 per cent in 2024. For the current fiscal year, too, four in five municipalities expect their finances to develop rather unfavourably or very unfavourably; 91 per cent expect them to worsen over the next five years.

These are the initial findings of the KfW Municipal Panel which is to be published in June.

There is some hope that the Federal Government’s Special Fund for Infrastructure and Climate Neutrality will provide new impetus. Around one in five municipalities (22 per cent) expect the Special Fund to give their investments more added value already in 2026. For 2027, 38 per cent of municipalities already expect the planned investment volume to be higher as a result of the Special Fund than it would otherwise have been.

Municipalities can use funds from the Special Fund for investments in almost all municipal infrastructure assets. Accordingly, they plan to use the funds across a broad range of areas. Certain areas clearly stand out, however. Around half of the municipalities that are already planning with funds of the Special Fund in 2026 reported allocating them to roads and school infrastructure, followed closely by investments in fire safety and disaster management. One third of municipalities each plan to invest funds in childcare and sport facilities. These priorities are a reflection of the investment backlog that municipalities have experienced for some time.

The picture is similar for the planned distribution of disbursements from the Special Fund. On average, municipalities want to use 24 per cent of the funds they receive for schools, 22 per cent for roads, 18 per cent for fire safety and disaster management, and 10 per cent for childcare facilities.

“The funds from the Special Fund are of course a welcome financial boost for the municipalities. But they are just a drop in the ocean if we consider the large investment backlogs. In order to enable municipalities to maintain their infrastructure in good condition again with funds of their own, we need a structural reform of municipal finances and not just temporary financial injections, as helpful as these may be in individual cases,”

said Dr Dirk Schumacher, Chief Economist of KfW.

The analysis can be found at Focus on Economics | KfW

The KfW Municipal Panel is an annual representative survey of municipal treasuries which the German Institute for Urban Affairs (Difu) has conducted on behalf of KfW since 2009. In the first quarter of 2026, a total of 2,904 municipalities with more than 2,000 inhabitants were surveyed, with a response rate of 37 per cent. KfW plans to present all findings of the KfW Municipal Panel 2026 in June.

KfW supports municipalities with a number of promotional programmes on behalf of the Federal Government. Further information is available at Public Institutions | KfW