Equalization Payments in Germany

German states marked as donor states (green), recipient states (red) and more or less balanced states (yellow)

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The equalization payment transfer benefit in Germany is (As of 2012)

a mechanism for the redistribution of financial means between federation and states (Länder),
a mechanism for the redistribution of financial means between countries.

Equalization payments is the most famous system for financial compensation in Germany. Its goal is to suitably even up the different financial clouts of the states. (Article 107, Paragraph 2, Sentence 1 of the German Grundgesetz.

Equalization Mechanism

The equalization of payments by extension is a multilevel operation. Only equalizing steps can be applied to legally compulsory sequences. In particular the equalization amongst the German Länder (horizontal financial adjustment) can be strictly separated from the federation's power to the Länder (vertical financial adjustment). The financial adjustment of the Länder in the narrower sense is the most famous component of this overall system.

Horizontal financial adjustment
- Value added tax
- Financial adjustment of the Länder in the narrower sense.

Politics of Germany

States	Baden-Württemberg Bavaria Brandenburg Hesse Lower Saxony Mecklenburg-Vorpommern North Rhine-Westphalia Rhineland-Palatinate Saarland Saxony Saxony-Anhalt Schleswig-Holstein Thuringia

City-states	Berlin Bremen Hamburg

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