Seeking ways to solve the debt crisis of the municipalities

Beginning of December 2011, the Friedrich Naumann Foundation for Freedom invited seven district mayors from Seoul and the Southern city of Kwangju to Germany. Central themes of the study tour that included visits to Munich, Dresden and Berlin were privatization and debt reduction in German cities.

The numerous meetings with local government representatives provided insights in the financial situation of the municipalities in Germany and possible solutions to overcome the debt crisis. In South Korea, the municipalities are financially still highly dependent on the central government and there are concerns that the country’s increasing overall debt will severely reduce the municipalities’ budgets. Therefore, to the Korean delegation the current debate about the financial crisis of the city hospitals in Munich was of great interest.

Roland Werner, vice minister of economy and transportation of the Free State of Saxony, representatives of the city of Dresden and the Saxon Association of Liberal Local Politicians stressed that municipalities would gain more public property through consequent and well-aimed privatization. The meeting with representatives of the German Chamber of Industry and Commerce in Berlin and the German Association of Cities highlighted the importance of privatizing at the “right moment”. In addition, the experience of the privatization of the water supplying company in Berlin has shown the necessity to take decisions exclusively based on economic factors and to abstain from political interventions.

In a meeting with the treasurer of the Friedrich Naumann Foundation for Freedom and former mayor of the city of Bremerhaven, Manfred Richter, the Korean delegation reflected on their visit and the newly gained insights. They concluded that privatization can only be successful if competition with other companies exists and the regulatory force of the market is guaranteed.