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Solidarity Pact I (March 16, 1993)

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The Ten-Point Paper agreed upon in Bonn states: “Financing German unity in difficult overall economic times necessitates a considerable effort by the federal government, the states, and the municipalities to provide the economy with reliable basic data. That requires that Germans endeavor to express solidarity. There is agreement among the parties involved about the long-term financing of German unity beginning in 1995. The basic points of this agreement are:

1. The funding of the new states and their municipalities is guaranteed through a transfer of 55.8 billion Marks in 1995. In addition, the allocation of finances between the federal government and the states will be newly regulated.

2. Additional efforts shall be made to eliminate inherited ecological problems and to secure and renew the industrial cores. With this goal in mind, the credit framework of the Treuhandanstalt [Trusteeship Agency] will be expanded.

3. With a view toward promoting the sale of products from the new federal states, the suitability of appropriate instruments and the financial means needed in connection with this shall be assessed.

4. There is fundamental agreement about the necessity of reforming the railroad.

5. The following is agreed upon to strengthen housing construction in the new states:
– A solution to the question of inherited debts in housing construction could be reached: a cap of 150 Marks per square meter; the corresponding cap amount of 31 billion Marks will be added to the fund for inherited burdens. Revenue from housing privatization will be used to cover the corresponding burdens in the fund for inherited burdens. The relevant interest rate subsidies amount to 4.7 billion Marks (1994) and 2.35 billion Marks (1995), half of which will be borne by the federal government and half by the new states.
– As long as housing companies cannot yet be entered into the real land registry as owners, transitional guarantees will be granted.
– The Credit Institute for Reconstruction program of the federal government will remain at 30 billion Marks. Ten billion of that will be used to improve prefabricated apartment blocks with an interest rate reduction of three percentage points; for the remaining 20 billion Marks there will be an interest rate reduction of two percentage points.
– The improvement in the environment surrounding the housing will be continued within the framework of the promotion of urban construction in the East.
– The law for the economic promotion zone will be extended for two years for housing construction investments in private assets (50% special deduction in the first five years).

6. To stabilize an active labor market policy over the course of 1993, the federal government will make an additional two billion Marks available.

7. Statutory social services will not be cut. Abuses in the area of social and economic services will be vigorously combated.

8. There is agreement that cuts in spending and the dismantling of tax subsidies must generate savings of nine billion Marks.

9. With regard to the introduction of the solidarity surcharge of 7.5% on January 1, 1995, there is agreement that a social component over and above the exempt amount is envisaged. The private wealth tax will be increased, with an adjustment of the exempt amount from 70,000 to 120,000 Marks. There is agreement that, as a result, the federal government will have an additional 28 billion Marks at its disposal in 1995.

10. With respect to the financial needs of the new federal states, there is agreement that, for 1993, the federal government and the old states will make their excess revenues from the Interest Income Tax Act (855 million and 1.3 billion Marks, respectively) available [to help] here. An additional 1.55 billion Marks will be made available, namely by the federal government and the old states in equal parts. All in all, an additional 3.7 billion Marks will be made available to the German Unity Fund in this way in 1993. To stabilize the revenue from the German Unity Fund in 1994 as well, the federal government and the old states intend to raise additional funds. This shall be deliberated by the group of finance ministers, with the goal of arriving at a decision by the chancellor and the heads of government of the states. The federal government will contribute an amount of 5.35 billion Marks during these deliberations among the finance ministers. The old states are assessing whether they will provide additional amounts over and above a pledged amount of 3.5 billion Marks.

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