Concept and legal classification of the Erblastentilgungsfonds
Der Erblastentilgungsfonds was a government-established special fund for the financing and settlement of old debts and liabilities resulting from the division of Germany. Its purpose was, in particular, to assume and reduce government debts and obligation liabilities of the former German Democratic Republic (GDR). The Erblastentilgungsfonds was created in the context of German reunification in 1990 and served as a central instrument for managing the fiscal challenges of German unity.
Legal Basis
Establishment and Purpose pursuant to the Erblastentilgungsfondsgesetz (ELFG)
The Erblastentilgungsfonds was established by the Erblastentilgungsfondsgesetz (ELFG), law of September 27, 1990 (BGBl. I p. 2143). The legal framework regulated in detail the establishment, administration, purpose, and winding up of the fund.
According to § 1 ELFG, the purpose of the fund was “to reduce the liabilities of the German Democratic Republic existing as of July 1, 1990, and to satisfy the associated interest and redemption obligations.”
Legal status as a special fund
According to § 2 ELFG, the Erblastentilgungsfonds was established as a special fund of the federal government . A special fund is a legally independent economic and asset entity, managed outside the regular federal budget and acting autonomously. The fund acted—within its specific legal Rules—as a legal entity.
Duties and Functionality
Assumption of GDR debts
The principal area of responsibility of the fund was the assumption and management of outstanding loan liabilities, guarantees, and other financial obligations held by the GDR at the time of the currency, economic, and social union with the Federal Republic of Germany on July 1, 1990.
Repayment modalities and financing
The refinancing of the redemption fund was mainly through federal subsidies, proceeds from the sale of assets by the Treuhandanstalt (especially in the course of privatizing East German enterprises), and revenues from the sale of restitution property.
The repayment period and modalities were determined by the Erblastentilgungsfondsgesetz and additional budgetary laws. It was to be used exclusively for the purposes defined in the law.
Budgetary Aspects
The fund was administered by the Federal Ministry of Finance. The budgetary segregation from the federal budget was strict, as the special fund served no general coverage function for the federal budget but was limited to specific areas of responsibility.
Pursuant to § 6 ELFG, the budget and business plans of the fund were to be prepared separately and considered separately during budget and financial audits.
Involved Institutions and Responsibilities
Federal Ministry of Finance
The Federal Ministry of Finance had the main administrative responsibility for the fund. It prepared the annual financial statements and participated in monitoring and controlling the use of funds.
Treuhandanstalt
The Treuhandanstalt transferred the proceeds from privatization and the sale of former East German companies to the Erblastentilgungsfonds for designated use. These funds were given priority for debt reduction.
Federal Audit Office
The auditing of the budget and financial management of the Erblastentilgungsfonds was carried out by the Federal Audit Office in accordance with the requirements of the Federal Budget Code.
Liquidation and Dissolution
Historical development until dissolution
As debt repayment progressed, the fund was gradually reduced. The Erblastentilgungsfonds was finally dissolved on December 31, 2017, by Article 1 of the ‘Act on the Dissolution of Federal Special Funds in the Area of Financial Administration.’ Remaining liabilities were transferred to the federal budget.
Significance and Critique
Financing German unity
The Erblastentilgungsfonds served as a central instrument for addressing the financial burdens of reunification. With its help, the funding requirements arising from liabilities assumed from the GDR were decoupled from the regular federal budget and made transparent.
Budgetary and Transparency Criticism
It was criticized that shifting old debts into a special fund only formally, but not economically, reduced the structural budgetary burdens of the Federal Republic. Nevertheless, the creation of separate accounting was generally considered suitable for transparently presenting the financial obligations of reunification.
Legal Consequences and Implications
With the dissolution of the fund, all rights and obligations of this special fund have been transferred to the federal government. The particularities of tax and budget law relating to the Erblastentilgungsfonds lapsed with the end of the fund’s existence.
Literature and Further Reading
- Bundestag printed papers on the establishment and dissolution of the Erblastentilgungsfonds
- Federal Law Gazette: Erblastentilgungsfondsgesetz (ELFG)
- Annual reports of the Federal Audit Office on fund management
- Reports of the Federal Ministry of Finance on the fund’s financial development
Summary: The Erblastentilgungsfonds was a central institution in the German reunification process for settling East German legacy debts. Legally structured as a special fund, it had autonomous financial management, was administered by federal ministries, and funded by Treuhand proceeds. Statutory allocation of purpose and winding up made it a temporary instrument of German fiscal and reunification policy.
Frequently Asked Questions
Which legal frameworks govern the Erblastentilgungsfonds?
The Erblastentilgungsfonds is primarily governed by the Act Establishing the Erblastentilgungsfonds (Erblastentilgungsfondsgesetz – ELFG). The ELFG was adopted as part of German reunification to address the legacy debts arising from the division of Germany. Essential legal foundations, alongside the ELFG, include various implementing regulations and relevant federal budget laws. Specifically, the following legal areas are significant: Constitutionally, the assumption of debt must be reconciled with the Basic Law (especially Art. 115 GG, debt regulation). Additionally, European legal requirements regarding government budget deficits (e.g., Stability and Growth Pact of the EU) affect the operation of the Erblastentilgungsfonds. Decisions of the Federal Constitutional Court concerning public debt law and budget transparency (e.g., in the context of special funds) are also essential for shaping the legal framework.
Which legal actors are involved in the administration and oversight of the Erblastentilgungsfonds?
The administration of the Erblastentilgungsfonds is the responsibility of the Federal Ministry of Finance (BMF) as the responsible department; in this function, the BMF is supported by specialized departments and, where appropriate, subordinate authorities, for example, the Federal Financial Supervisory Authority within financial supervision. Parliamentary oversight is exercised by the Budget Committee of the German Bundestag, which has rights of participation and control over funds and special assets based on budgetary regulations. Additionally, the Federal Audit Office has a legally enshrined auditing and reporting right concerning the regularity and efficiency of the fund’s financial management. In matters involving the EU, European bodies such as the European Court of Auditors may act within the scope of their powers.
To what extent is the Erblastentilgungsfonds subject to the debt brake under the Basic Law?
From a legal perspective, it should be noted that, according to Art. 115 GG and the so-called debt brake, the federal government’s borrowing authority is limited, and strict restrictions apply to special funds. However, the Erblastentilgungsfonds was set up as a special fund explicitly entrusted with the assumption of legacy debts—i.e., debts incurred before the debt brake came into force. The classification as ‘old liability’ is legally significant, as it enabled an exception from ongoing borrowing rules. Nevertheless, new borrowing in the fund is permanently excluded based on budget legislation and the German Constitution. The constitutional admissibility of such funds has repeatedly been a subject of legal controversy and constitutional proceedings, with the ultimate conclusion that explicit commitment to repaying historical burdens is permissible.
What legal rules on liability apply in the context of the Erblastentilgungsfonds?
The liability framework for the Erblastentilgungsfonds is primarily based on federal public debt law; that is, the fund is liable from its assets and, as a legally dependent special fund, ultimately subsidiarily the federal government. According to §§ 37, 38 BHO, the BMF acts for the special fund but is not personally liable; creditor claims are directed against the special fund or, secondarily, the Federal Republic of Germany. Direct liability against individual states or other institutions is legally excluded unless express legal obligations have been assumed. A recourse against the fund administrators is only conceivable in cases of intentional or grossly negligent breach of duty, which refers back to general official liability regulations.
What legal requirements exist regarding transparency and reporting for the Erblastentilgungsfonds?
The principles of budgetary transparency and truthfulness as per §§ 12, 13 BHO, as well as annual public reporting (§ 114 BHO, accounting principle), apply to the Erblastentilgungsfonds. The Federal Ministry of Finance is therefore required to separately record all revenues and expenditures and to submit a comprehensive annual report to the Bundestag. These reports are subject to audit by the Federal Audit Office. Violations of reporting and documentation obligations may be administratively or even criminally relevant as budgetary infidelity or breach of duty. In addition, under the Freedom of Information Act, there is a duty to provide information, although with exceptions for state welfare and the protection of confidential information.
Does the Erblastentilgungsfonds require subsequent amendments to budgetary law?
Yes, the establishment and further development of the Erblastentilgungsfonds regularly required adjustments to budgetary law. This particularly affected amendments to the Federal Budget Code and accompanying administrative regulations, e.g., concerning regular repayments and earmarking of income, regulations on allocations from the federal budget, as well as provisions regarding reserves or refinancing. New budgetary statements, preliminary audits in the legislative process, and often extensive justifications concerning constitutional compatibility were and are necessary to ensure the continued legal certainty of the fund.
How are disputes related to the Erblastentilgungsfonds resolved legally?
Disputes arising in connection with the administration, use of funds, or repayment arrangements of the Erblastentilgungsfonds are subject to the general legal process of the Federal Republic of Germany. In the event of a dispute, the administrative courts have jurisdiction, particularly regarding the monitoring of budget management and lawful use of funds (see Administrative Procedure Act – VwGO). For constitutional matters, such as the admissibility of fund expenditures under Art. 93 GG, the Federal Constitutional Court is the final authority. Civil law disputes, e.g., regarding loan or bond terms, are dealt with before the ordinary courts, where the special fund conditions must be observed. Legal remedies and options for action are always determined by the relevant procedural code.
