Actually for the state of Rhineland-Palatinate, it is cheaper to subsidize HHN and then to cash the tax from all the people working there than to have them all unemployed (talks are about 6000 - 8000 jobs which will get lost if HHN looses FR). In this case the state government will have to pay lots of dole money and will not get any tax back.
The Hunsrück hills, where HHN is sited, where always a rather poor and backward region. The main road connections were only built by the Nazis in the 1930s, and not to please the locals, but to support the German invasion of France.
Up to the end of WW2 local economy was small scale farming (mainly cattle breeding on the rocky fields and woodcutting). Many locals left the region to look for work in the prosperous Rhine-Main area.
During cold war, a lot of locals used to work for the American forces, but most lost their jobs when the cold war ended and the Americans closed their bases.
Opening HHN was one of the best things the state government ever did and it is picking up on cargo traffic.
BTW, when the Americans left HHN, it was essentially a runway and a tower. Almost all buildings used today have been built after the Americans left (and most of those left by the Americans are so badly contaminate with asbestos that they are dangerous to live in. They will have to be torn down at high expenses, same as the various aircraft shelters cluttering the airfield.
AFAIK, the removal of one shelter costs about 100.000 Euros), with German tax money (I seriously doubt that FR invested anything serious into HHN). FR, as important as they are for HHN, managed in the past to drive several other airlines, which wanted to become established in HHN and would give the airport another source of income, out, so that they would have total control of the passenger side of operations. This way FR managed to obtain an almost total monopoly on passenger operations and can make demands.
Concerning FR stating that HHN was making a loss for them, I fly quite often with FR (fastest connection for me to visit my girlfriend). I have to say that the aggressive style of advertisement FR use in their aircraft for onboard sales is considered to be very annoying by me and most German passengers. For myself, if I get annoyed by advertisement, I refuse to buy anything. I have talked to people e.g. from Poland and other places on the continent and they agree.
Ryanair's advertisements seem to work in Ireland and the UK, but there is definitely a difference in mentality, which has to be taken into account to sell stuff on the continent.