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German federalism after unification: the legal/constitutional response.

The collapse of communism in East Germany and the resulting German unification produced a new focus on the operation of federalism in a unified Germany and on certain reforms concerning fiscal federalism and various constitutional amendments. The initial decisions about financing the new Lander in the East soon proved to be inadequate, and after much controversy a "new" solidarity pact" was concluded between the federal and Land governments in March 1993. To counter recent trends toward increasing centralization, a constitutional commission proposed a number of amendments, now underconsideration by the federal parliament, which would strengthen the Lander vis-a-vis the federal government. The Lander have also been concerned about the growing interference by Brussels in their affairs. As a result of recent changes in the Basic Law, they have strengthened their position in relationship to the federal government and the European Union.

The breaching of the Berlin Wall on 9 November 1989 was the beginning of the end of the Communist German Democratic Republic (GDR), the other communist regimes in Eastern Europe, and even the Soviet Union. The Cold War had been winding down since Mikhail Gorbachev assumed power in the mid-1980s, but few if any observers had expected a collapse of the Soviet empire and with it the dissolution of the Warsaw Pact and of Comecon, the ineffective economic community of the Soviet bloc.

Certainly less momentous, but still of great importance to Germany and Europe, were the changes that the collapse of the East German regime and German unification brought about in German federalism and European integration. Indeed, German federalism has undergone such fundamental changes that it is in some respects a different system today.(1)

The differences between the federal system before the Wall and today and the impact of some of these changes on Germany's relations with the European Union (European Community) are the major focus of this article. They include some obvious and rather dramatic changes, such as the addition of five new Lander (states, plural form) and a united Berlin as one Land (state, singular form). They also include some important changes less evident to the outside observer, such as a revised (if not dramatically reformed) system of fiscal equalization; an increase in voting power in the Bundesrat for the four largest Lander, and a series of constitutional changes affecting the powers of the Lander vis-a-vis the federal government, the procedures for territorial reorganization of the Lander, and the role of the Lander via the Bundesrat in the decisionmaking process concerning the European Union (EU).

The unification of Germany also had a significant impact on European integration. The 16,000,000 citizens of eastern Germany were added to the European Community with relatively few complications, thus strengthening an already leading -- in some respects the leading -- member state and, as a result, arousing latent fears about German economic and political domination in Europe. The Maastricht Treaty, signed in December 1991 and ratified by all member states by fall 1993, is in part a reflection of these concerns in its provisions for increased European integration. Thus, one might argue that German unification has been the catalyst for a new European Community (i.e., the European Union) as well as for a new German federalism.

UNIFICATION. THE IMMEDIATE IMPACT

The fall of the Wall took everyone by surprise, including most Germans. It had been assumed that the Soviets, even under Gorbachev, would never allow their prize of World War II and their most productive and successful client state to become truly independent, let alone join with West Germany. Given the uncertainties of the Soviet reaction to events in East Germany and the lingering fears of a number of European countries concerning a united Germany, the West German government moved cautiously. On 28 November 1989 Chancellor Helmut Kohl proposed a ten-point plan with unification being the final goal.(2) For our purposes, three steps were especially important: first, Kohl proposed that the German Democratic Republic and the Federal Republic enter into a "contractual community" that would bring cooperation in such areas as science and technology, culture, and the environment; second, he proposed that confederate structures be developed, and third, he suggested that unification be achieved in a series of small steps, leading to a federation. That a united Germany would be a federation was clear, not only because of a long history of federalism and the success of the federal system in the West from 1949 to 1989, but also because of a requirement of Article 79 of the West German Basic Law (constitution).

Soon after Kohl's statement, events led to the conclusion that unification would have to occur much sooner. About 2,000 people were leaving the GDR every day for West Germany, a situation that neither German state could tolerate for long. The first free East German elections were moved up from May to March, and unification seemed possible in 1991 or even 1990.

Within weeks after the Wall fell, people in the GDR began to agitate for the reestablishment of the East German Lander created after the war and abolished by the East German regime in 1952 in favor of a centralized unitary state.(3) Even though three of the five Lander had little or no tradition, and all five had existed only a few years after 1947 there was evidence that most East Germans identified with them more than with the GDR. On 21 June 1990, a bill (Landereinfuhrungsgesetz) that amended the GDR constitution and provided for five Lander (Brandenburg, Mecklenburg-West Pomerania, Saxony, Saxony-Anhalt, and Thuringia) went through its first reading in the East German parliament. The bill was passed into law on 22 July 1990, and the five Lander (with certain border adjustments) came into being on 3 October. The law of 22 July also created a united Berlin as a sixth Land. The law contained provisions permitting additional boundary changes, and after 1990 various adjustments continued to be made by state treaties between the Lander.

The prospects of unification served as a powerful inducement for practitioners as well as experts to ponder the specific features of federalism in a united Germany. In July 1990, the prime ministers of the Federal Republic issued a report on the "cornerstones" of federalism in Germany. They noted the importance of the picture a federal Germany had presented to its neighbors, and they expressed concern that developments over the years had led to an increasing centralization and a reduction in Land powers. They called for a strengthening of the Lander, and they made several proposals for constitutional changes, several of which became the basis of recommendations discussed below.(4)

On 31 August 1990, the two German governments signed the Unification Treaty, which served as the domestic basis of German unification on 3 October 1990. (The Two-Plus-Four negotiations between the two Germanies and the four World War II allies set the international stage.) In the first article of the treaty, East Germany agreed to join West Germany under Article 23 of the Basic Law, according to which "other parts of Germany" could accede to the Federal Republic. Article 4 of the Unification Treaty abolished Article 23 of the Basic Law and added the five new Lander to the preamble of the Basic Law. This indicated that there are no other parts of Germany to be joined, thus calming the fears of some Poles and Czechs that Germany might seek certain territories it had possessed or claimed before World War II.

Article 4 of the Unification Treaty also gave the four largest Lander six votes in the Bundesrat instead of the five they had before. The Bundesrat, technically not a second house of parliament but rather a unique institution that allows Land governments (cabinets) the right to participate in the national legislative process, considers all federal legislation. It has an absolute veto over legislation that affects the Lander, which is more than 50 percent of the total,(5) and a suspensive veto over remaining legislation. With 21 percent of the population of united Germany (23 percent with Berlin) and 28 percent of the 68 votes in the Bundesrat (34 percent with Berlin), there was concern in the four large western Lander that the five new Lander could join with the small Lander in the West to push through fiscal equalization policies that would be too costly for the large Lander. Six votes each give the four large Lander the ability to block the two-thirds majority in the Bundesrat needed for a constitutional amendment.

Besides the provisions affecting the votes in the Bundesrat, the Unification Treaty contains a number of other items of relevance to German federalism. Article 5 "recommends" to the Bundestag and Bundesrat that they consider, within a two-year time frame, various constitutional changes "with respect to the relationship between the federation and the Lander in accordance with the joint statement of the Land prime ministers of 5 July 1990" and with respect to the possibility of boundary changes for the Berlin/Brandenburg region. Article 7 deals in considerable detail with the temporary adjustments in the system of fiscal federalism made necessary by the creation of the five new Lander and the large gap in own-source revenues and needs between these and the Lander in the West. Other provisions affecting federalism were less direct, such as Article 10 and the application of European Community law in the new Lander.(6)

FISCAL FEDERALISM(7)

It was apparent in Article 7 of the Unification Treaty that a major concern of everyone participating in the unification process was the financing of the East's routine government services and activities and the virtually unimaginable needs for infrastructure investments. To complicate matters further, the Basic Law calls for a uniformity of living conditions in the country as a whole that could not possibly be met in the short term. Problems of financing the poorer Lander in the West had caused great political controversy that became the basis of two major Federal Constitutional Court decisions in the 1980s. Now these seemed almost minor compared to the challenges presented by the new eastern Lander. At least from today's perspective, it is not surprising that the temporary "solutions" provided in the Unification Treaty were inadequate from the beginning.

Unlike the United States, where each plane of government determines which taxes to raise and at what rates, the most important German taxes are shared by the different governments while regulated by federal law, however, federal tax laws must be approved by the Bundesrat, which represents the Land governments. The shared taxes in Germany are those placed on income, corporations, and sales of services and products (VAT0, which together are called joint taxes (Gemeinschaftssteuern). These account for about three-fourths of all tax revenues in the Federal Republic. Since 1980, the municipalities have received 15 percent of the income taxes derived from the payments of local citizens. The remaining 85 percent of the income tax and all of the revenues from the corporation tax are divided equally between the Land and the federal governments. The VAT, which is less sensitive to economic conditions than the income and corporation taxes, was added to the shared taxes by the Finance Reform of 1969. It was 14 percent of sales and services before January 1993, after which date it was raised to 15 percent. The Lander received 35 percent of the VAT until January 1993, when their share was raised to 35 percent (to be raised to A percent in 1995).

Separate taxes, shared or common taxes, and federal grants to the Lander are all a part of what is called in Germany "vertical fiscal (or tax) equalization." In order to provide a more equitable distribution of tax revenues than vertical equalization alone can produce, a "horizontal fiscal equalization" among the Lander and municipalities has been added as an important feature of the Land and local tax systems. Because of the virtually uniform tax system, differences among the Lander are not as great as among the American states; nevertheless, the systems of vertical and horizontal tax equalization are designed to assist the Lander still further in providing conditions approaching the "uniform living conditions" called for in the Basic Law.(8)

Although it was clear even before the Wall fell in November 1989 that the system of fiscal equalization needed reform,(9) a political solution did not seem to be in sight. With unification, the situation changed dramatically.(10) Unless a temporary separate regulation for the five new Lander could be found, the former West German fiscal equalization system would be overwhelmed. All of the West German Lander with the exception of the poorest, Bremen and perhaps the Saarland, would become paying Lander, and they would all have to give up their supplementary federal grants. Because this scenario was unacceptable to the old Lander, provisions were made in the Unification Treaty for a special set of arrangements for the new Lander. In May, the old Lander and the federal government had agreed to share the projected East German deficit on the basis of the ratio of one-third old Lander, one-third federal government, and one-third East German Lander. The West German share was set at DM 115 billion through 1994, to be paid through a specially created German Unity Fund. DM 20 billion were to be raised by the federal government from savings gained from costs once attributed to the division of Germany (e.g., aid to West Berlin, aid to border regions). The rest was to be divided between the federal and Land governments and raised by borrowing. This would leave the old Lander with a DM 47.5 billion bill to pay.

The German Unity Fund was established by the old Lander in compensation for excluding the new Lander until 1 January 1995 from the normal vertical and horizontal fiscal equalization schemes provided by the Basic Law. Experience soon showed these arrangements to be unsatisfactory, and a number of corrections were made in February 1991. The new Lander received their full share of VAT funds as of January 1991, although some division between East and West was retained. The federal government also gave up the 15 percent of the German Unity Funds that it had intended to use for "central purposes." An additional special fund was established that was to send DM 12 billion to the East for investments and work programs. In spite of earlier assurances by Chancellor Kohl that taxes would not have to be raised to finance unification, certain taxes, including a temporary 7.5 percent surcharge on the income tax, were raised in 1991 when it became clear that the costs of unification were higher than anticipated.

In addition to these measures, serious partisan controversy emerged toward the end of 1991 concerning an increase in the VAT from 14 to 15 percent and an increase in the Land share in the VAT revenues from 35 to 37 percent. The proposal passed in the Bundestag, but the SPD (Social Democratic Party) threatened to use its new majority in the Bundesrat to defeat the measure. The only Land in the East governed by the SPD, Brandenburg, deserted the national party, however, and voted with the Bonn government coalition parties (CDU/CSU: Christian Democrats, FDP: Free Democrats) in February 1992 to uphold the change.(11)

Taken together, various transfers to the East are amounting to very large sums, and such large transfers will continue in the coming years. In 1991, they amounted to DM 153 billion (almost $100 billion). The federal government, the German Unity Fund, and the Trusteeship Agency (Treuhandanstalt) responsible for privatizing the approximately 8,500 businesses in East Germany (later separated into about 12,500 units) contributed DM 128 billion, the Federal Labour Office DM 19 billion, and various West German Lander and municipalities DM 6 billion. About 62 percent of these funds were spent for various social measures (e.g., unemployment compensation and subsidized wages) and 38 percent for investments.(12) Projections show that transfers to the East of about DM 180 billion will be required for the remainder of the 1990s.

In the meantime, widespread dissatisfaction and pessimism in the East have resulted from high unemployment and underemployment, the closing down or shrinking of whole industrial branches, and a feeling that the East Germans are misunderstood by their sometimes arrogant and contemptuous "big brother" in the West. The expected rush by West Germans and other Westerners to invest in the East has not materialized. A largely neglected and decaying infrastructure (e.g., roads, railways, and telephone systems), outmoded industrial equipment, the collapse of markets in eastern Europe, catastrophic environmental pollution, inadequate and decaying housing, continued uncertainties regarding property ownership, and other serious deficiencies, in some cases not recognized or anticipated sufficiently in the West before unification, have discouraged investors. In a Bundesbank report published in March 1992, it was noted that with 20 percent of the population, the East was producing only 3.5 percent of the German gross domestic product.(13) In spite of the massive public investments now taking place and planned for the near future, some observers are suggesting that with luck the East Germans may be producing goods and services at 55 percent of the per capita rate in the West by the end of the century.(14) Others have suggested that the East is about forty years behind the West in economic development.(15)

Given the economic conditions in the East, the heavy burdens on the federation, and the realization by the old Lander that admitting the new Lander to the West German system of fiscal equalization would have devastating consequences for them, it became clear that the federal government and the Lander would have to devise a new financing system before 1995, when the new Lander were scheduled to join the equalization system as regular members. As a result of these pressures, the finance ministers of the sixteen Lander formed in September 1991 a working group, Finance Reform 1995. This group met regularly until the spring of 1993, during which time some of the larger, economically stronger, Lander proposed reforms generally opposed by the smaller, economically weaker, Lander. The new Lander were, of course, interested in being included as soon as possible in the fiscal equalization measures, but no model of reform could gamer a majority.(16)

The disagreements between the federation and the Lander were also a barrier to reaching consensus on a reform model. This encouraged the Lander to work together in order to counter the federal government's efforts to push through reforms that the Lander could see as disadvantageous to them. After many months of wrangling between the federal government and the Lander and among these as well, a "solidarity pact" was finally reached in May 1993.(17) Starting in 1995, the pact will provide annual transfers of DM 56 billion for ten years to the East along with billions in loans for housing construction, infrastructure, environmental cleanup, and business promotion. The pact also provides for the payment of DM 40 billion for old East German debts. Altogether, there will be transfers of DM 100 billion (about $65 billion) annually. The federation's contribution will be financed largely by a 7.5 percent "solidarity surcharge" on income taxes and corporation taxes after 1995. The five new Lander will be included in the horizontal fiscal equalization procedures, which will require larger transfers to the new from the old Lander. In compensation, the Lander will receive 44 percent instead of 37 percent of the VAT after 1995.

Basically, the solidarity pact was a victory for the Lander. They succeeded in getting the federal government to agree that it was largely responsible for carrying the burden of subsidizing the new Lander. As a result the Lander will be responsible for only about 10 percent of the burden taken on by the federation. Nevertheless, this means large sums (e.g., DM 700 million for Rhineland-Palatinate and DM 4.3 billion for North-Rhine Westphalia). Local governments will also be affected because the Lander will pass on some of their additional expenditures to local governments.(8) The extent to which the local units in the West suffer in the future will undoubtedly become an issue for the relatively powerful local government associations.

The changes represented by the "solidarity pact" were basically incremental, in spite of the pressures from many directions to produce a major reform of the system of fiscal equalization and to amend the Basic Law accordingly. Some disillusioned observers even complained that the failure to agree to constitutional changes reflects a basic inability to reform the federal system.(19)

A major reform, however, was probably unrealistic. The western Lander (and their local governments) were not prepared to sacrifice too much for their eastern counterparts, given the fact that most of them were on the receiving end of the fiscal equalization process before the Wall came down and have a long history of complaining about inadequate financing. Concerns have also been expressed since the Federal Republic was established in 1949 that the Lander may be, or are, too dependent on the central government for their finances, thus reducing Land autonomy. These concerns, understandably, are not shared to the same extent by the eastern Lander, so the reluctance of the western Lander to sacrifice and the eagerness of the eastern Lander to receive financial support from whatever source probably encouraged a "solidarity pact" that may have the unintended consequence of undermining the autonomy of the eastern Lander.

FEDERALISM AND CONSTITUTIONAL CHANGE

As indicated above, the Unification Treaty called on the Bundestag and Bundesrat to consider a number of constitutional changes. It was clear that unification would require changes, and, of course, those who thought that certain reforms were required even before unification seized the opportunity to push their own reform agenda. Indeed, some Germans had argued that unification could proceed only under Article 146 of the Basic Law, which required a constitutional convention and a document approved by the people.(20) But given the domestic and international pressures in early 1990, the less problematic, much simpler, and faster procedures of Article 23, which provided for accession of German territories outside the Federal Republic, became the legal basis for unification.

As indicated earlier, some constitutional changes occurred already under Article 4 of the Unification Treaty. Thus Article 23, under which the five new Lander joined the Federal Republic, was repealed. The preamble of the Basic Law was changed to add the five new Lander to the list of Lander in Germany and to state that the Basic Law now applies to all Germans. The four largest Lander, all located in the West, were given six rather than five votes in the Bundesrat. In addition to other changes, Article 146 of the Basic Law was revised to read: "This Basic Law, which applies to the whole German people following the realization of unity and freedom, will lose its validity on the day on which a new constitution goes into effect which has been freely accepted by the German people."(21)

In March 1991, the Bundesrat formed a Commission on Constitutional Reform for the purpose of recommending changes in the Basic Law to strengthen the Lander. The commission consisted of thirty-two members, two from each Land. It submitted a report in May 1992.

Meanwhile, during the debate in the Bundestag in May 1991 concerning the recommendations of Article 5 of the Unification Treaty, it became clear that the governing and opposition parties had different views on how implementation was to proceed. The CDU/CSU-FDP coalition advocated the creation of a constitutional committee with thirty-two members, sixteen each from the Bundestag and Bundesrat. The SPD urged the formation of a much larger constitutional council with 120 members, including not only politicians but also representatives from the scientific, cultural, economic, labor, and other walks of life. These proposals symbolized significant differences over the nature of the changes to be made, namely, minor adjustments or a thoroughgoing review. Not surprisingly, the Greens and Bundnis 90 called for a "total revision," whereas SPD spokespersons indicated their commitment to the major points of the Basic Law but also their support for numerous changes. The CDU/CSU and FDP objected to a general review and to participation by persons outside of parliament. The governing parties also rejected the proposal of the SPD to hold a referendum on the revised Basic Law.(22)

Finally, a Joint Constitutional Commission, consisting of thirty-two members each from the Bundestag and Bundesrat, was formed in January 1992.(23) It considered the Bundesrat recommendations of May 1992 as well as the proposals made by other bodies, but it did not consider itself bound by any of them. It received about 800,000 communications, some of which were mass mailings, from individual citizens and various groups. Most of these communications concerned equal rights for women, plebiscitary elements, animal rights, environmental issues, minority and human rights, and equal rights for unmarried partners. It is probably not surprising that fewer than sixty communications had anything to do with federalism.(24)

From January 1992 to the fall of 1993, the Joint Constitutional Commission met twenty-six times and held nine mostly public hearings. It considered eighty proposals for changing the Basic Law and looked at one-half of the Basic Law's articles in the process.(25)

Federal-Land Relations

While many of the amendments proposed by the Commission deal with issues other than federalism, our focus is on those recommendations that affect the federal system. It was noted above that for many years there has been concern in Germany about the increasing centralization of functions and weakening of the Lander.(26) These concerns have concentrated on the financing of the federal system, joint tasks, federal grants, and European integration. Also of great significance have been federal preemptions of concurrent powers and detailed federal regulations via the framework laws. These preemptions and regulations have affected especially the powers of the Land legislatures (Landtage), which some observers argue have been marginalized to an alarming extent. In order to strengthen the Lander, at least with respect to concurrent powers and framework laws, the Joint Constitutional Commission recommended a number of changes that were considered by the Bundestag in the spring and summer of 1994.

For Article 72, which deals with concurrent powers, the recommendation was made to insert more precise language to limit federal preemptions to specific laws rather than to allow the federation to absorb a broad function based merely on a partial preemption. Another recommendation gives the federation preemption rights to secure legal uniformity or "equivalent living conditions" around the country rather than "uniform living conditions" as before. Given the obvious difficulty in interpreting this provision, a proposed revision of Article 93 gives the Bundesrat, a Land government (cabinet), or a Land parliament the right to go to the Federal Constitutional Court for clarification in specific cases.(27)

Article 75 provides for federal framework laws. The commission's recommendations make more precise the language that grants the federation powers to pass framework legislation regarding higher education by limiting the legislation to several areas rather than talking about "general principles of higher education." The recommendations also discourage detailed federal regulations.

The recommendations for Article 76 would grant the Bundesrat "for important reasons" nine rather than six weeks to react to federal government proposals; the federal government could still impose a three-week time limit in certain urgent cases. The recommendations would also harmonize the provisions regarding legislative initiatives of the Bundesrat; that is, these could be sent to the Bundestag for its deliberation within nine weeks rather than the normal six weeks (instead of the previous three months) if the federal government so requests "for important reasons." The Bundesrat could also request action within three weeks for urgent matters. Recommendations also call for both the Bundestag and the Bundesrat to complete their deliberations within a reasonable period of time.

Other important recommendations relevant to German federalism concern Articles 24 and 28. The proposal for Article 24 would grant the Lander the right to transfer, with approval by the federal government, certain sovereign powers to transnational border authorities for the purpose of dealing with common problems. A recommended addition to Article 28 calls for including the principles of autonomous financial responsibility in the guarantee of local self-government. It is not entirely clear what this really means, because it is not supposed to be interpreted as committing the federation to a guarantee of financial support for local governments.

Territorial Reorganization

The creation of five new Lander in the East has revived an old and divisive debate in Germany regarding a Neugliederung, or reordering and reorganization, of the Lander. In general, the restructuring of Land boundaries in Germany has occurred in the past only under severe pressure from the outside and/or as the result of war.

In the late 1960s, there was much discussion of territorial reform, including boundary reforms for the villages, towns, cities, counties, and the Lander. Major territorial reforms were enacted for local areas in the eight territorial Lander,(28) and a commission was formed to look at the Land boundaries. This commission, called the Ernst-Kommission, recommended major boundary changes.(29) It proposed that the Federal Republic have either five or six Lander. Nothing ever came of these proposals, due in part to the Finance Reform of 1969 and the rise of "cooperative federalism."

Since early 1990, discussions of reordering boundaries and reducing the number of Lander have continued unabated. There is relatively little controversy over the proposal to combine Berlin and Brandenburg into one Land (which does not mean it will happen), but proposals to incorporate the smaller and weaker Lander in the West, especially Bremen and the Saarland (Hamburg has indicated a willingness to consider consolidation with one or more of its neighbors), into larger neighboring Lander and to reduce the number of Lander in the East have led to heated debate. As an alternative, there has also been some discussion of cooperative arrangements between Lander to promote common goals.(30)

There are powerful arguments both for and against redrawing Land boundaries and reducing the number of Lander from sixteen to eight or ten.(31) It seems clear at the time of writing, however, that with the possible exception of Berlin and Brandenburg, there will be no consolidations or redrawing of boundaries. The Lander that are the most obvious targets in the West, namely Bremen and the Saarland, are the most vehemently opposed to consolidation, and it would not be easy to convince the Lander in the East that they should merge after having just been reestablished.

Nevertheless, the Joint Constitutional Commission has recommended changes in Article 29, which deals with territorial reorganization. The key change would allow the Lander to negotiate state treaties for the purpose of altering boundaries. Whether affecting a small boundary region or an entire Land, the treaty would be subject to popular approval by referendum. The required majority would have to constitute no less than 25 percent of the eligible voting population. In essence, the recommendations make boundary changes somewhat easier to achieve; however, the required referendum is still a significant barrier.

Prospects for Change

These and other recommendations made by the Joint Constitutional Commission were considered by the Bundestag during the 1994 legislative session. Because they all received the required two-thirds majority in the commission, which included party representatives in proportion to their strength in parliament, the chances of passage seemed good. However, critical elements within the various parties insisted on changes in certain provisions, e.g., concerning the protection of ethnic rights (only German citizens, such as Sorbians and Danes, or also foreign workers and refugees?) and support for higher education institutions. The provisions concerning federalism discussed above also became an issue.

On 30 June, the Bundestag approved the proposals for new state goals regarding environmental protection, gender equality, and protection of the handicapped. But the required two-thirds majority failed to materialize in support of most of the proposed changes, including the revisions of Articles 72 and 75 designed to strengthen the Lander vis-a-vis the federation. The CDU/CSU, which were responsible for the rejections, argued that the proposals were either unnecessary or undesirable. With regard to the proposals concerning the Lander, some voices in the government coalition even warned against moving toward a confederation.

The SPD opposition expressed its disappointed over the rejection of the constitutional commission's "package" proposals and accuse the CDU/CSU of breaking their word. Some spokespersons for the Bundesrat warned that that body might in retaliation reject the proposals that did pass. Others said they would call for the mediation committee to reconsider the rejected items while accepting the changes that did get through the Bundestag. The Bundesrat might be able to consider the constitutional commission's proposals before the federal elections in October 1994, but it is more likely that they will be revisited in the 1995 parliamentary session. The fact that the federalism proposals are not a typical partisan matter for the Bundesrat is reflected in the insistence by the Bavarian CSU (sister party of Chancellor Kohl's CDU) that Land powers be strengthened. There is at least a possibility, then, that the Basic Law can still be revised to strengthen the Lander due to the actions of the Bundesrat that are yet to be determined.(32)

Constitutions in the Lander(33)

Following their accession to the Federal Republic in October 1990, the five new Lander adopted temporary constitutions and established constitutional commissions to draft new permanent constitutions. By June 1992, two Lander -- Brandenburg and Saxony -- had gone through the process of drafting, presenting to the public, and passing new constitutions, while a third Land, Saxony-Anhalt, had completed a "consolidated draft." Mecklenburg-West Pomerania and Thuringia introduced their new constitutions in 1993; the first was approved by the Land parliament in early fall 1993 and confirmed by a popular referendum in June 1994, while Thuringia's constitution will be submitted to a referendum on the same day as the Bundestag elections (16 October 1994). Saxony and Saxony-Anhalt did not hold referenda but relied instead on a two-thirds vote of the Land parliament.(34)

In most respects, the constitutions of the new Lander are similar to those of the "old" ones.(35) Thus, they all provide for democratic, parliamentary systems with a one-house legislature (only Bavaria has a second chamber). There are also numerous differences, however, as in frequency of parliamentary elections, openness of committee meetings, provisions regarding the opposition, and parliamentary majorities needed to elect judges.

The new constitutions are similar in their focus on "progressive" basic rights (e.g., housing, employment, and child-care facilities) and certain "state goals" (e.g., clean environment). These new basic rights and state goals have become very controversial, with the proponents arguing that they represent "modern" constitutional thinking and the opponents arguing that they are not enforceable (courts cannot force the construction of housing or provide jobs) and therefore raise expectations that cannot be met.(36)

The new constitutions also provide for popular initiatives and referenda, thus reflecting demands, especially by the Left, for more participatory democracy. These provisions have become controversial as well, in particular because of the relatively low signature requirements for petitions and lower thresholds for acceptance quotas for referenda (especially in Brandenburg). In contrast to the states in the United States that have referenda, a minimum percentage of the electorate (e.g., 25 percent) must favor a measure before it is considered to have passed. It should also be noted that no Land constitution permits referenda on public salary scales, budgets, or finances.

While the focus of attention is now on constitution-making in the five new Lander, several "old" Lander have already (Schleswig-Holstein and Lower Saxony) or are currently engaged in amending or writing new constitutions. Like the constitution-makers in the East, they are wrestling with controversial issues, such as state goals, social and economic rights, and plebiscitary measures. Whether these issues are more symbolic and rhetorical than real, that is, whether they will really become subjects of future court challenges and parliamentary debates, remains to be seen.

FEDERALISM AND THE EUROPEAN UNION(37)

As the constituent parts of the only federal system in the EU,(38) the German Lander have been caught in the dilemma of supporting European integration while at the same time finding it necessary to resist developments that threaten to, or actually do, undermine Land autonomy in certain functional areas. As a result, the Lander have come to see EU matters as "European domestic policy" rather than as foreign policy.(39)

An important constitutional provision in this regard is Article 24 of the Basic Law, paragraph 1 of which states that "[t]he Federation may by legislation transfer sovereign powers to intergovernmental institutions." This means that the federal government can transfer not only its own but also Land powers to Brussels without the approval of the Lander, in spite of Article 79 which guarantees federalism in Germany. In addition, Article 235 of the EU Treaty grants "implied powers" to the EU, including education, broadcasting, and media (i.e., Land powers). Because of the growing influence of the EU in European policymaking in general, the Lander fear increasing marginalization.(40) From the beginning, the Lander have been concerned about the effect of the EU on their autonomy, and initial efforts by the Bundesrat to protect Land interests proved ineffective.(41) Between the late 1970s and the late 1980s, however, the Lander, via the Bundesrat, won several important concessions from the federal government and gained some influence over federal policymaking with respect to the EU.(42) To help them anticipate issues that needed to be raised in the Bundesrat and to keep informed generally about EU matters, the Lander opened their own information Offices in Brussels.(43) It should be noted, however, that these measures have benefited the various Land executives, not the Land parliaments, which continue to feel threatened by developments in European integration that affect their powers.

As noted above, in July 1990, before unification in October, the prime ministers of the German Lander met and produced a document on "cornerstones" (Eckpunkte) of German federalism.(44) Among other things, the document calls for a revision of Article 24 to give the Lander a greater voice in transferring powers to intergovernmental organizations (primarily the EU). In the following months, pressures for more European integration, the result in large part of German unification, were serving as a powerful incentive to adapt the Basic Law to a more integrated Europe. In November 1991, a month before the Maastricht meeting, the Bundesrat passed a resolution outlining Land government views on the requirements of any agreement on European Union. The Lander expressed support for more integration, but they also noted that the draft treaty did not meet all of their demands or expectations for a strong federal Europe. They insisted on clear and unequivocal support for the principle of subsidiarity,(45) a stronger Committee of the Regions(46) as a "third level" (below the Union and the member states), increased policymaking input for the Lander in the Council of Ministers, more powers for the European Parliament (which would seem to weaken the Lander in the larger scheme of things), and other measures.(47)

The Maastricht Treaty on European Union, which was concluded in December 1991, satisfied most, if not all, of the demands of the Bundesrat resolution. It contained a number of implications for the Lander that would be addressed in constitutional amendments (see above), but it required only two specific revisions of the Basic Law: Article 28, which deals with local government, had to be revised to allow citizens of the EU with residences in Germany to participate in local elections, and Article 88 had to be changed to allow the transfer of the functions of the Bundesbank to an EU central bank.

When the Joint Constitutional Commission met for the first time in January 1992, it was clear that one of the most important revisions of the Basic Law would have to concern the relationship of the Lander to the EU. As a result of the commission's deliberations, the old Article 23, which had been used to unite the two Germanies in 1990, was replaced entirely by a new Article 23, which deals with the European Union.

The new Article B notes the participation of Germany in the development of a democratic European Union with the purpose of achieving a united Europe. It mentions specifically the principles of federalism and subsidiarity and the guarantees of basic rights. It states that the federation, with the approval of the Bundesrat, can transfer sovereign rights to the EU. The federal government is required to take into consideration the views of the Bundestag in its decisions regarding the affairs of the EU, however, it is not bound to follow these views. In cases where the functions involved belong to the federation, the views of the Bundesrat must also be taken into account, however, where Land powers are affected, the federal government must, for all practical purposes, follow the wishes of the Bundesrat. Article 23 even goes so far as to allow the representative of a Land government to exercise the rights of the Federal Republic in the Council of Ministers when the issues at stake involve Land powers.

In order to carry out these provisions, Article, 45 was revised to create a Europe Committee in the Bundestag. Article 52 allows the Bundesrat to form a Europe Chamber. In both cases, these committees are responsible for dealing with the federal government under the provisions outlined above in Article 23. Unlike other -- still pending -- recommendations by the Joint Constitutional Commission for changes in the Basic Law, the recommendations described above regarding the EU were approved by the Bundestag and Bundesrat in December 1992.

In addition to the changes in Article 45 described above, Article 24, paragraph 1a, has been amended to provide the Lander, with federal government approval, the authority to transfer certain autonomous rights to transborder agencies in order to strengthen cooperation with neighboring countries in dealing with common problems. These include educational institutions, police, garbage, and water.

CONCLUSION

Unification has brought about a significant number of changes in German federalism. Most obvious was the creation of five new Lander in the East and the unification of East and West Berlin into one Land. The increase in the number of Lander from eleven (including West Berlin) in West Germany to sixteen in the new Federal Republic raised the number of votes in the Bundesrat from 45 to 68, thus creating an even more complex decisionmaking process in federal policymaking. It also led to the four largest Lander in the West demanding and receiving additional votes in the Bundesrat in order to protect their interests from a potentially aggrandizing coalition of small Lander (a kind of reversal of the argument in the Constitutional Convention in Philadelphia about small versus large states).

The fiscal strains of unification were anticipated in the Unification Treaty in August 1990, but their depth and scope did not become apparent until later. This led to new financial arrangements in the form of a "solidarity pact" concluded in March 1993. This pact places a burden on all planes of government in the West. First appearances suggest that the federal government will end up with the heaviest burden, for example, by giving up a significant proportion of the shared taxes to the Lander. Some observers argue, however, that the Lander and their local governments will be severely disadvantaged in the long run. In any case, the new Lander in the East will be largely dependent on both vertical and horizontal fiscal equalization for the next few decades, which is bound to raise questions about their autonomy in the federal system.

The Unification Treaty also made several changes in the Basic Law and "recommended" additional amendments to the Bundestag and the Bundesrat. A Joint Constitutional Commission was formed for this purpose, and a number of changes were proposed (and some already accepted). Some of these directly concern federalism, for example, the distribution of powers between the federal and Land governments and, to a lesser extent, the Land and local governments. If accepted, which now seems doubtfull, these changes could have a significant impact on German federalism. In any case, the proposed changes show the seriousness with which the members of the Joint Constitutional Commission took their charge to strengthen the Lander.

The Lander have been especially concerned about the intrusiveness of the EU in their affairs. They have not become anti-EU, but they have demanded and, as a result of several constitutional changes, they have received considerable satisfaction of their demands. The new Article 23 deals explicitly with the EU, not only by giving the Lander the right to participate via the Bundesrat in the German government's EU decisionmaking, but also by granting them the right to represent Germany in the EU Council of Ministers when Land powers are involved. It should be interesting to observe the reaction of the national ministers of the other member states to the ministers of German Lander in the Council. They may wonder, for example, what might happen in the future if a "Europe of the Regions" should become a reality. New provisions of Article 24, which authorize the Lander to transfer certain powers to transborder operations, are also an example of an unusual grant of powers in a federal system. In an increasingly interdependent world, it may be that these kinds of constitutional changes will provide a model for other federations in their relations with trading partners or neighboring states.

The proposals and actual changes noted above, in addition to other proposed constitutional amendments affecting federalism, such as a slight improvement in the ability of the Lander to effect boundary changes and a somewhat ambiguous strengthening of local government autonomy, could lead to a "revived" federal system quite different in some respects from the system predating the Wall. There is also some potential for significant change in the new Land constitutions, especially in regard to "state goals" and referenda. Some observers have even suggested that of the three levels of the EU (the central, national, and regional), the one most likely to atrophy in the distant future is the national level. This would be the result of many powers being transferred to Brussels, Luxembourgh, and Strasbourg because of the need for European-wide action, and to the regions because of the principle of subsidiarity.

However, given the inertia of most political systems, including the German, and the centralizing pressures emanating from domestic and European developments, especially but not only with regard to finances, one might be permitted a certain degree of skepticism that the German Lander will become significantly stronger in the near future, either in the domestic or European arena. In any case, it should be of considerable interest to scholars of comparative federalism to see whether the new German federalism will really become all that different from the old. AUTHOR'S NOTE: I wish to thank Professor Dr. Franz Gress, University of Frankfurt, and the anonymous referees for their useful comments.

(1)For detailed studies of German federalism by the end of the 1980s, see Arthur B. Gunlicks, ed., "Federalism and Intergovernmental Relations in West Germany: A Fortieth Year Appraisal," Publius: The Journal of Federalism 19 (Fall 1989): entire issue, and Charlie Jeffery and Peter Savigear, eds., German Federalism Today (New York: St. Martin's, 1991).

(2)Das Parlament, vol. 39 8 December 1989, pp. 4-6.

(3)For plans and developments concerning the reestablishment of the Eastern Lander, see Arthur B. Gunlicks, "Federalism and German Unification," Politics and Society in Germany, Austria and Switzerland 4 (Spring 1992): 52-66.

(4)"Die Eckpunkte' der Bundeslander fur den Foderalismus im vereinten Deutschland. Beschluss vom 5. Juli 1990" (The Comerstones of the Federal States for Federalism in the United Germany -- Resolution of 5 July 1990), Zeitschrift fur Parlamentsfragen (Journal for Parliamentary Questions) 21 (October 1990: 461-463. For and English version, see Charlie Jeffrey and John Yates, "Unifacation and Maastricht: The Response of the Linder Governments," Federalism, Unification and European Integration, eds. Charlie Jeffery and Roland Sturm (London: Frank Cass, 1993) pp. 72-76.

(5)For a description of the Bundesrat, which includes a table (p. 37) showing percentages of consent bills before that body from 1949-1990, see the monograph by Uwe Thaysen, The Bundesrat, the Lander and German Federalism Washington, D.C.: American Institute of Contemporary German Studies, Johns Hopkins University, 1994). See also Hans-Georg Wehling, "The Bundesrat," Publius: The Journal of Federalism 19 (fall 1989): 53-64.

(6)For the text of the Unification Treaty, see Europa Archiv, vol. 45, 25 October 1990, pp. D515-D536.

(7)Much of the following discussion is based on my chapter, "The Future of Federalism in a Unified Germany," The Domestic Politics of German Unification, eds. Christopher Anderson Karl kaltenthaler, and Wolfgang Luthardt (Boulder: Lynne Rienner, 1993), pp. 159-164, and "The `Old' and the `New' Federalism in Germany," Germany at Forty-five, ed. Peter Merkl (London: Macmillan, 1994).

(8)See Basic Law, Article 72, paragraph 2(3) and Article 106, paragraph 3(2).

(9)Ulrich Exler, "Financing German Federalism: Problems of Financial Equalisation in the Unification Process," Federalism, Unification and European Integration, pp. 22-37.

(10)The following discussion is based on Wolfgang Renzsch, Finanzverfassung und Finanzausgleich (Financial Constitution and Fiscal Equalization) (Bonn: Verlag J. H. W. Dietz Nachfolger, 1991), pp. 274-281.

(11)See The German Tribune, 28 February 1992, p. 3.

(12)Bundestag, Report 6/91, 12 October 1991, p. 12. (13) "Die Zahlungen and Ostdeutschland verringern" (Reduce the Payments to East Germany), Frankfurter Allegemeine Zeitung, 19 March 1992, p. 15.

(14) Peter Christ, "Der Osten schreibt rot" (The East Writes Red Ink), Die Zeit (The Time), North American edition (Hamburg), 6 March 1992, pp. 7-8.

(15) Lothar Julitz, "Die Investitionslucke schliessen" (Closing the Investment Gaps), Frankfurter Allegemeine Zeitung, 13 March 1992, p. 15.

(16) Wolfgang Renzsch, "Die Verfassungsreform blieb aus" (There Was No Constitutional Finance Reform), Das Parlament, vol. 44, 14 January 1994, p. 14.

(17) For a brief report on the "solidarity pact," see the German Information Center's weekly news summary, The Week in Germany, 4 June 1993, p. 4. For German accounts, see "Die Eckpunkte des Solidarkompromisses" (The Cornerstones of the Solidarity Compromise), Das Parlament, vol. 43, 19-26 March 1993, p. 6 and Frankfurter Allegemeine Zeitung, 28 May 1993, p. 1.

(18) Thomas Hanke, "Solidarisch daraufgesattelt" (With Solidarity in the Saddle), Die Zeit, North American edition, 16 March 1993, p. 9.

(19) Renzsch, "Die Finanzverfassungsreform blieb aus," p. 14.

(20) See Donald P. Kommers, "The Basic Law Under Strain: Constitutional Dilemmas and Challenges," The Domestic Politics of German Unification, p. 136.

(21) For the text, see Europa Archiv, vol. 45, 25 October 1990, pp. D515-D536.

(22) Bundestag, Report 4/91, 29 May 1991, pp. 2-4.

(23) For useful articles summarizing the work of the Joint Constitutional Commission, see the entire issue of Das Parlament, vol. 44, 14 January 1994. The official government publication that deals with the Joint Constitutional Commission in considerable detail is Bericht der Gemeinsamen Verfassungskommission (Report of the Joint Constitutional Commission), Deutscher Bundestag, 12th Wahlperiode, Drucksache 12/6000, 5 November 1993.

(24) Deutscher Bundestag, Drucksache 12/6000, pp. 124-127.

(25) Ibid., p. 11.

(26) See, for example, Hartmut Klatt, "Forty Years of German Federalism," Publius: The Journal of Federalism 19 (Fall 1989): 185-202.

(27) A discussion of this and the following recommendations can be found in Deutscher Bundestag, Drucksache 12/6000.

(28) Arthur B. Gunlicks, Local Government in the German Federal System (Durham, N.C.: Duke University Press, 1986), Ch. 4, and Arthur B. Gunlicks, Local Government Reform and Reorganization: An International Perspective (Port Washington, N.Y.: Kennikat, 1981), Ch. 10.

(29) Bundesministerium des Innern (Federal Ministry for the Interior), Bericht der Sachverstandigenkommission fur die Neugliederung des Bundesgebietes (Ernst-Kommission) (Report for the Expert Commission for the Reorganization of Federal Territory) (Bonn: Bundesministerium des Innern, 1973).

(30) For an excellent analysis of the problems of territorial reorganization and a discussion of regional cooperation as an alternative, see Arthur Benz, "Redrawing the Map? The Question of Territorial Reform in the Federal Republic," Federalism, Unification and European integration, pp. 38-57.

(31) Ibid. See also Gunlicks, "The Future of Federalism in the Unified Germany," pp. 156-159; Uwe Leonardy, "Into the 1990s: Federalism and German Unification," German Federalism Today, pp. 143-147. For a strong pro argument in German, see Ulrich Penski, "Die Vereinigung beider deutscher Staaten als Problem und Herausforderung fur das foderalistische System in Deutschland" (The Unification of Both German States as a Problem and a Challenge for the Federal System in Germany), Foderalismus in der Bewahrungsprobe (Federalism in the Trial Stage), eds. Arthur B. Gunlicks and Rudiger Voigt (Bochum:

(32) Frankfurter Allgemeine Zeitung, 16 June 1994, pp. 1 and 2; 17 June 1994, p. 4; and 30 June 1994, pp. 1 and 2.

(33) For a more detailed discussion of old and new Land constitutions, see Arthur B. Gunlicks, "State Constitutions in Germany," State Constitutions Around the World: A Comparative Study, ed. James Thomson (Westport, Conn.: Greenwood, forthcoming).

(34) The most comprehensive treatment of the constitutions of the new Lander so far is Hans v. Mangoldt, Die Verfassungen der neuen Bundeslander (The Constitutions of the New Federal States) (Berlin: Duncker & Humblot, 1993).

(35) For commentary and texts of the constitutions of the old Lander, see Christian Pestalozza, Verfassungen der deutschen Bundeslander (Constitutions of the German States) (4th ed.; Munchen: Deutscher Taschenbuch Verlag, 1991).

(36) For what appears to be a minority view among constitutional scholars in defense of state goals and plebiscitary elements, see Hans-Peter Schneider, "Die Deutschen haben kein Talent zur Verfassungsreform" (The Germans Have No Talent for Constitutional Reform), Das Parlament, vol. 44, 14 January 1994, p. 8.

(37) For a general analysis of the European Community from a federal perspective, see Alberta M. Sbragia, "The European Community: A Balancing Act," Publius: The Journal of Federalism 23 (Summer 1993): 23-38.

(38) Since July 1993, Belgium has declared itself to be a federation.

(39) Jeffery and Yates, "Unification and Maastricht," p. 69.

(40) Michael Burgess and Franz Gress, "The Quest for a Federal Future: German Unity and European Union," Comparative Federalism and Federation, eds. Michael Burgess and Alain-G. Gagnon (New York and London: Harvester Wheatsheaf, 1993), pp. 168-186; for a list of policy area in which the Lander see EU interference, see Rudolf Hrbek, "German Federalism and the Challenge of European Integration," German Federalism Today, pp. 86-87.

(41) Klaus Otto Nass, "The Foreign and European Policy of the German Lander," Publius: The Journal of Federalism 19 (Fall 1989): 175-176.

(42) Ibid., 178; Hrbek, "German Federalism and the Challenge of European Integration," pp. 94-96.

(43) Hrbek, "German Federalism and the Challenge of European Integration," pp. 96-97.

(44) "Die `Eckpunkte' der Bundeslander fur den Foderalismus im vereinten Deutschland. Beschluss vom 5. Juli 1990," S461-S463.

(45) "Subsidiarity" has been much discussed since its inclusion in the Maastricht Treaty. Its core meaning is the exercise of decisionmaking and/or implementation powers by the lowest possible or feasible level of government. Its meaning is not precise, and there are at least three competing "ideologies" of subsidiarity: a Christian Democrative version, another based on German federalism, and a third derived from British conservatism. See John Peterson, "Subsidiarity: A Definition to Suit Any Vision?." Parliamentary Affairs 47 (January 1994): 116-132.

(46) The Committee of the Regions, established by the Maastricht Treaty as an advisory body, had its first organizational meeting in Brussels on 2 March 1994. The Maastricht Treaty calls for delegates from 189 regions, defined as such by the individual member states. The German delegation consists of twenty-four members, one each from three cities and twenty-one from the Lander.

(47) For the English text of the resolution, see Jeffrey and Yates, "Unification and Maastricht," pp. 76-79.
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