Having been more than strained for the longest time, the finances of Germany's first city are well on their way to recovery. Despite enormous social costs, Berlin's finances are finally showing an upward trend. This is the upshot of a recent survey conducted by the PwC auditing firm. In terms of sustainability, Berlin's budget moved up two ranks compared to last year, ascending from seventh to fifth place. This means that Berlin improved its position by four ranks since 2014. Indeed, the city's sustainability ranking has gone up steadily, from 91.2 percent in 2012, to 98.1 percent in 2015, and now to 99.2 percent, according to the latest survey. The annual PwC Sustainability Index, which was launched in 2012, analyses the fiscal policy of German's 16 states on the basis of their financial strength and structuring options up to the year 2020. The index considers a given state budget sustainable if its future spending, carried forward on the present level of expenditure, continues to be covered.
Berlin's Finances have been Consolidating since 2012
In the latest ranking, Berlin is directly behind Baden-Württemberg (fourth), with Hamburg in third place, Lower Saxony the runner up, and Bavaria taking the top spot. While Berlin has steadily stabilised and consolidated its budget in the years since 2012, it continues to show a score just below 100 percent. The states who scored less than 100 percent will obviously have to try hard to consolidate their finances before 2020 than the other states. In Berlin's case, this means specifically that although the city is closing in on the average score of the leading states, it remains under above-average pressure to consolidate.
With its Sensible Budget Policy, Berlin is Heading in the Right Direction
While advising the city to stick to its responsible budget policy, the latest PwC survey also recommends that it is high time for Berlin to step up its investments, or actually to double them incrementally. Berlin's social spending is already down. At less than 10 percent, the city's unemployment rate is now at its lowest level since the fall of the Berlin Wall in 1989. Efforts to increase investments are already underway. Since 2012, Berlin has had no budget overruns anywhere. The city even managed to bring down its debt by more than 2 billion euros over the past years. The success of its financial policy clears the way for increased investments going forward. Dr. Matthias Kollatz-Ahnen, Berlin's Senator of Finance, sees the survey findings as a sign that the current budget policy is on the right track. According to Kollatz-Ahnen, Berlin will maintain the course of recent years and seize the opportunity of its ongoing growth to keep economising and complying with the debt cap even beyond 2020, while incrementally stepping up its investments to bring it level with the national average at the same time.