Stuttgart faces the threat of insolvency by the end of 2025 because the city and the Green state government relied on a loss-free transformation of the automotive industry. Losses from conventional technology were supposed to be offset by new business areas in green technology. This offsetting failed to materialize. As a result, Stuttgart’s financial crisis worsened because business tax revenues plummeted and the automotive industry shrank faster than politically anticipated. (epochtimes: 14.12.25)
Insolvency as a Result of Misguided Political Assumptions
The foreseeable insolvency is not a short-term effect, but rather the result of years of misguided assumptions. The city administration and the Green state government assumed that the restructuring of the automotive industry could succeed without significant economic cutbacks. This assumption replaced sound risk analyses.
Instead of taking precautions, the administration and politicians clung to optimistic budget projections. As a result, Stuttgart’s financial crisis didn’t develop gradually, but accelerated. A structural budget crisis was recognized too late.
Business tax revenue collapses, undermining the budget
In 2023, Stuttgart generated approximately €1.6 billion in business tax revenue. This revenue was considered stable and flowed directly into the medium-term financial plan. For 2025, the city treasury is projecting only €750 to €850 million.
In addition, the city must repay previously collected business tax to companies, immediately reducing its cash balance. This effect exacerbates Stuttgart’s financial crisis because it not only results in a lack of future revenue but also the loss of already budgeted funds.
Automotive industry cuts jobs and loses added value
The automotive industry continues to form the economic backbone of the region. This very dependence is now becoming a risk. Profits are falling, investments are being reduced or relocated, and jobs are being cut or are considered to be at serious risk. The hoped-for compensation through new technologies failed to materialize because the automotive industry is transforming more slowly than politically assumed.
Nevertheless, the city and the Green state government assumed stable transition years. This miscalculation accelerated the insolvency because budget projections were based on outdated performance figures.
Deficits escalate into a structural financial crisis
The full extent of Stuttgart’s financial crisis becomes apparent in the 2026/2027 biennial budget. Approximately €478 million is missing for 2026, and a further €304 million for 2027. In total, this results in a structural deficit of almost €800 million.
This magnitude cannot be remedied through operational savings. Even drastic cuts to discretionary spending would only slow the budget crisis, not resolve it.
Liquidity is faltering – insolvency is becoming a real possibility
The city’s cash position is particularly critical. Internal forecasts indicate a negative cash balance by the end of 2025. While the city formally remains capable of acting, in reality, insolvency is approaching a threshold at which short-term loans become unavoidable.
At this point, municipalities regularly lose their ability to manage their finances. Detroit also crossed this threshold after political assumptions overshadowed actual financial data.
Mandatory expenditures further exacerbate the budget crisis
While revenues are collapsing, expenditures continue to rise. Social services, youth welfare, and refugee accommodation generate hundreds of millions of euros annually. The federal and state governments only partially offset these burdens, even though the Green Party-led state government bears some political responsibility.
This dynamic is intensifying Stuttgart’s financial crisis because every new budget creates additional deficits. The city is paying the price for unsustainable economic policy assumptions.
Late Countermeasures with Limited Impact
Stuttgart is now reacting with an austerity budget for 2026 and 2027. Investments are being postponed, staffing levels frozen, and voluntary services cut. At the same time, the city is planning higher fees and new levies to partially compensate for the shortfall in business tax revenue.
These measures provide short-term relief but will not prevent insolvency as long as the structural revenue problems persist. Corporate tax revenue remains volatile, and new sources of income are growing too slowly.
Stuttgart as a Warning Signal for Other Cities
This development demonstrates how risky political optimism regarding transformation can be. The automotive industry lost substance faster than new markets became viable. The Green state government focused on idealized visions while the economic foundation eroded.
Stuttgart is thus becoming a warning signal for other municipalities. The path to insolvency does not begin with collapse, but with misjudged transitions. The figures leave no room for interpretation. (KOB)