During a press conference on 25 June 2026, German Chancellor Friedrich Merz and state leaders announced a joint federal‑state agreement aimed at strengthening cooperation. The pact focuses on financial relief for municipalities, introducing a “who orders, pays” principle that will take effect from 1 September (later agreed to 1 October). Under this rule, no federal law will be enacted that imposes costs on local governments without a corresponding compensation. The agreement also outlines a broader state‑modernization program, including 400 measures to reduce bureaucracy, automate child‑benefit payments, digitize vehicle registration, and accelerate infrastructure projects. The leaders stressed that these steps will simplify administration and improve fiscal balance for both federal and state governments.
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