Since the system is based on redistribution to a large extent there are no incentives for the borrowing states to cut spending or try to strengthen their income base, the economists criticize in their study. They do not consider the states' proposal to be an improvement. Instead, the members of the Kronberger Kreis are concerned about a lack of democratic control and fiscal responsibility. In their view, the proposition of a joint bond of the federal states will lead to an additional financial burden of 9.7 billion euro a year, which the tax payers would finally have to bear.
The members of the Kronberger Kreis now call for abolishing exceptions like the calculations regarding the number of inhabitants ("Einwohnerveredelung") and instead, introducing a higher level of transparency. In their opinion, more fiscal authority has to be granted to the Länder.
Kronberger Kreis Study No. 62
Lars P. Feld, Clemens Fuest, Justus Haucap, Volker Wieland, Berthold U. Wigger
„Für eine echte Reform der Bund-Länder-Finanzbeziehungen“
51 pages, PDF in German