ifo Dresden: Less Economic Development Aid in the East, More in the West

A good 30 years after German reunification, funding for investment projects can be scaled back in some eastern German regions due to their positive development. Conversely, parts of western Germany need more support. “The areas surrounding Berlin in particular, together with the areas around Dresden, Leipzig, and Jena, have developed so well that funding there can be reduced. At the same time, some structurally weak regions in western Germany are being upgraded to a higher aid category. These include the Ruhr area, Saarland, and the Pirmasens labor market region,” says economic expert Joachim Ragnitz from the ifo Institute’s Dresden Branch.

“Regional economic development aid – if successful – should become increasingly redundant. Even if nothing changes for most regions, this redefinition does show that aid policy is also responding appropriately to changing conditions,” Ragnitz says.

As of January 1, 2022, the framework has changed for many regions. The reason for this is the redefinition of the development areas, which is done at regular intervals. In 2022, it will be carried out for the first time on the basis of the “All-German Funding System.” New features include the demarcation of regional labor market regions and a change in the indicators used.

The ifo Institute’s Dresden Branch helped prepare the recent funding decision by drawing up various expert reports for the former German Federal Ministry for Economic Affairs and Energy (BMWi) together with the Gesellschaft für Finanz- und Regionalanalysen (GEFRA) and the Federal Institute for Research on Building, Urban Affairs, and Spatial Development (BBSR).