Berlin city admits bankruptcy - 46 billion euros debt
11/05/2002
Berlin (dpa) - The Berlin city government on Tuesday admitted de facto bankruptcy and announced it was taking legal action to force Germany's federal government to pay for a bail-out.
Ruled by a leftist alliance of Chancellor Gerhard Schroeder's Social Democrats (SPD) and the former East German communists (PDS), the city is staggering with 46 billion euros (46 billion dollars) public debt, Finance Senator Thilo Sarrazin said.
Sarrazin said this meant the city was paying 2.2 billion euros a year just to cover interest and he warned that the city's total debt would climb to 58 billion euros by 2006.
Berlin has a population of 3.5 million but the city has lost much of its industrial base and unemployment is currently 17 per cent.
Given the federal government's refusal to pay off Berlin's debts, Sarrazin said the city was taking legal action in Germany's Federal Constitutional Court to aimed at proving Berlin was incapable of shouldering the burden alone.
Germany's Basic Law, the federal constitution, stipulates there should be "equalization'' between financially strong and weak federal states, the Laender. Berlin, a city-state, is one of Germany's 16 Laender.
Under this constitutional arrangement annual payments are made from wealthy states, such as Bavaria and Hesse, to poorer regions such as the Saarland, Berlin and Bremen.
The lawsuit will be based on a clause in Article 107 of the Basic Law which provides for one-off emergency grants to states.
