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Highlights of Germany’s Budget for 2026

The German parliament will approve the budget for 2026 on Friday, with borrowing levels that are astronomical. This marks a radical departure from years of fiscal discipline.

Highlights of the conference:

The Key Numbers in Germany's Core Budget for 2026

The core budget for 2026, approved by Germany's Budget Committee, includes 58.3 Billion Euros in investments.

The core budget includes borrowings of 97,9 billion euro.

What happens to the Special Funds?

The increase in investment is possible because of a 500 billion euro special infrastructure fund, and the exemption from debt regulations for defence expenditures approved in March.

The German debt brake limits borrowing up to 0.35% Gross Domestic Product and excludes special funds.

Included in the total investment are investments made through special funds. This represents a 10% rise over 2025, and follows a 55% growth this year compared to 2024.

How much debt will Germany be?

The coalition government of conservatives and Social Democrats plans to borrow 97,9 billion euros by 2026 from the core budget.

Add borrowings through special funds for defence and infrastructure, and the total debt will exceed 180 billion euros. This level was only surpassed by the pandemic of the coronavirus in 2021, when the new debt reached over 215 billion euro.

This is three times more than the 50.5 billion euro borrowed by the previous government in 2024.

According to a forecast by the International Monetary Fund, the deficit will increase to 4% of GDP in 2027. The debt, however, is expected to reach 68% by that time. This is still at the lowest level of all G7 countries.

PROPAGING DAY-TODAY SPENDING

Germany uses some of its financial power to support day-today spending, rather than diverting it all into additional infrastructure.

According to a Green Party analysis, the government gained 10 billion euro of fiscal flexibility for 2026 by investing in the transport sector.

The German Economic Institute (IW) used 2024 as a benchmark in a study. This year preceded the creation of a special fund in march 2025.

Which Ministry will benefit the most?

The biggest growth will be in the defence budget, which will increase by over 20 billion euros.

Total defence spending, including special funds, is expected to reach 108.2 milliards of euros by 2026.

Germany will increase its financial assistance to Ukraine in 2026 to 11.5 billion euro, up from the 8.5 billion euro previously planned.

What will happen in the coming years?

The budgets for 2027 and 2020 will be a challenge despite the debt brake reform, and the new Infrastructure Fund.

The government currently expects a relatively small funding gap in the budget for 2027 of 11-12 billion euro, but a shortfall of 60 billion euro is expected by 2028. $1 = 0.8631 Euros (Reporting and editing by Maria Martinez)

(source: Reuters)