The article analyzes the development of welfare state and federalism in Germany and their interdependencein the last decades. The author points out that the extension of the welfare state challenges theindependence on the Land and communal level. However, the increasing expenses of the welfare state for theLand level can be hardly seen well-balanced. The Land level politicians are not interested in their decrease,because their re-election success depends on how far their voters are satisfied with the social policy. Such life beyond the allowed limits can be maintained through equalization of financing the Lands. Under such circumstances, the state is being forced to give up its attempts to reform the mechanism of public expenditureand overview the relationship between the social state and every citizen. The author has come to the conclusionthat the German case is important for the ongoing integration in the EU, for it shows where the problems can appear and also gives an idea which positions the German politicians defend in the course of this process.