Overview

• Markus Söder has warned he will withdraw Bavaria from the Länderfinanzausgleich by 2030 if no inter-state reform agreement is reached
• Bavaria lodged a constitutional complaint in 2023 at the Federal Constitutional Court challenging the equalization scheme under Article 107 of the Basic Law
• Revenue transfers hit a record €11.18 billion in the first half of 2025, with Bavaria contributing €6.67 billion to the fund
• Finance-strong states including Baden-Württemberg, Hessen and Hamburg fund the scheme while twelve recipient states, led by Berlin with €2.03 billion, benefit
• Proposed annual federal top-up payments of €400 million for donor states are awaiting parliament amid stalled debt-brake and broader fiscal reform talks