Saxony-Anhalt election could cost Germany billions, Ifo chief warns

Ifo Institute President Clemens Fuest warns that the election in Saxony-Anhalt could become expensive, urging a reform of Germany's fiscal equalization system if state policies weaken the economy. He argues that the financial consequences of poor political decisions are unfairly shifted onto the entire federal community. Saxony-Anhalt, one of Germany's weakest states, received over 3.2 billion euros in 2025 through various equalization payments, roughly a fifth of its total state budget. Fuest's concern follows the AfD's strong election result, which he says could deter investors, though he notes voters have the right to choose economic decline. The current system acts like an insurance, cushioning states from economic losses but also absorbing consequences of political mistakes. Fuest suggests reforms should allow states to keep more of their own additional revenue while bearing more responsibility for economic downturns, though he acknowledges the system is constitutionally mandated.