Equalization Payments in Germany

German states marked as donor states (green), recipient states (red) and more or less balanced states (yellow)

Germany
This article is part of a series on the politics and government of Germany
Constitution ("Fundamental Law Code") Human rights Federal Constitutional Court
Executive President Joachim Gauck Chancellor Angela Merkel Vice-Chancellor Sigmar Gabriel Cabinet Merkel III
Legislature Federal Convention (Bundesversammlung) Federal Council (Bundesrat) Federal Diet (Bundestag) Joint Committee (Gemeinsamer Ausschuss)
Judiciary Federal courts Constitutional Administrative Justice Finance Labor Social
Administrative divisions States (Länder) Administrative regions (Regierungsbezirke) Districts (Kreise) Collective municipalities (Ämter) Municipalities (Gemeinden)
Elections Electoral system Political parties Referendums
Foreign relations
Other countries Atlas

The equalization payment transfer benefit in Germany is (As of 2012)

• a mechanism for the redistribution of financial means between federation and states (Länder),
• a mechanism for the redistribution of financial means between countries.

Equalization payments is the most famous system for financial compensation in Germany. Its goal is to suitably even up the different financial clouts of the states. (Article 107, Paragraph 2, Sentence 1 of the German Grundgesetz.

Equalization Mechanism

The equalization of payments by extension is a multilevel operation. Only equalizing steps can be applied to legally compulsory sequences. In particular the equalization amongst the German Länder (horizontal financial adjustment) can be strictly separated from the federation's power to the Länder (vertical financial adjustment). The financial adjustment of the Länder in the narrower sense is the most famous component of this overall system.

• Horizontal financial adjustment
  • Value added tax
  • Financial adjustment of the Länder in the narrower sense.