In the red

Four of Germany's 16 states - Berlin, Bremen, Schleswig-Holstein and Saarland - have had their finances placed under outside supervision after falling heavily into debt.

The Stability Council, a body set up by states and Germany's central government, decided on the measure Monday after issuing the states with a warning about their finances last October.

Announcing the move, Bavarian Finance Minister Georg Fahrenschon - who jointly chairs the council together with German Finance Minister Wolfgang Schäuble - referred to the debt crisis of European countries such as Greece.

Such a situation "could not be allowed to come about in Germany," he said, adding that the issue was being taken "very seriously."

"The consolidation of budgets has top priority," said Fahrenschon.

All four of the states depend on borrowing from other parts of Germany, with low incomes among residents meaning that they have a shortfall in tax revenue.

Debt level near that of Greece

Bremen's government, for example, has a debt level equating to 27,300 euros ($38,300) for every person - almost as high on a per capita basis as Greece's deficit.

It is the first time that any of Germany's states, which possess a large degree of autonomy from Berlin, have been subject to such scrutiny.

The supervision program will last for five years and includes targets to reduce fresh annual borrowing. However, no sanctions are planned against states that do not meet the program's demands.

A program of savings has already been introduced in the states, with no additional cuts planned at present. In return, the four states, along with the state of Saxony Anhalt, are to receive a total of 800 million euros each year to bring their deficits under control by 2020.

Author: Richard Connor (dpa, Reuters)
Editor: Martin Kuebler