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In view of the empty state coffers and the high public debt, the topic of subsidy reduction plays a major role in the economic policy debate. The present contribution should serve to give the discussion a solid basis.

After the German unification, a large number of measures were taken to improve or build up the infrastructure in the new federal states, to promote investment activity and to cushion the adjustment process socio-politically.

After the German unification, a large number of measures were taken to improve or build up the infrastructure in the new federal states, to promote investment activity and to cushion the adjustment process socio-politically.

The extent and the structure of subsidies (including tax concessions) in the Federal Republic of Germany are analyzed. Subsidies per unit value added increased significantly after German reunification and declined only moderately in 1995.

The financial aid payments of the federal states are considerable. For the year 1995, a total amount of DM 83.8 billion was calculated.