Reforming Federalism German Style – A First Step in the Right Direction

The German version of federalism, often called 'co-operative federalism' has been identified by many as one of the root causes of Germany's becoming Europe's new sick man. Now, a number of changes in the institutions defining the relationship between the federal, the state and the local level have been passed. This contribution describes the most important changes and evaluates them from the point of view of fiscal federalism. It concludes that the changes are only a first step in the right direction, but a number of important steps have yet to follow.