Germany approves massive budget expansion with record new debt, defence spending

Seven weeks after taking office, the German federal government has approved its first major amendments to budget planning.

On Tuesday, June 24, the cabinet in Berlin endorsed Finance Minister Lars Klingbeil’s proposals for the 2025 federal budget, key budget indicators for 2026, and a financial plan extending to 2029, Caliber.Az reports, citing German media.

The package includes an unprecedented increase in defence spending and record levels of new debt.

Finance Minister Klingbeil told reporters after the cabinet meeting that the decision sends a clear message that “the country is moving forward.” He stressed that “the period of uncertainty and stagnation” caused by the previous government had ended, and that the new coalition is taking action to make Germany economically strong.

Under the new budget, the government plans to incur €81.8 billion in new debt for the current year. For subsequent years, the new debt levels are projected at €89.3 billion in 2026, €87.5 billion in 2027, €115.7 billion in 2028, and €126.1 billion in 2029. These funds are intended to both increase the Bundeswehr’s budget and address funding shortfalls in the overall federal budget.

The sharp rise in planned debt starting in 2028 is attributed to the shift of defence expenditures back into the core federal budget, ending the use of the special defence fund that was set up in response to Russia’s war against Ukraine.

According to the plan, overall federal spending will increase by 6.1% in 2025, reaching €503 billion. Spending is projected to continue rising to €519.5 billion in 2026, €512.7 billion in 2027, €550.4 billion in 2028, and €573.8 billion in 2029.

Defence spending will be gradually increased over the next few years, from €62.4 billion in 2025 to €152.8 billion in 2029. This increase was made possible by the March decision of the new ruling coalition to suspend Germany’s constitutionally mandated debt brake and amend the Basic Law accordingly.

Meanwhile, the opposition party Alliance 90/The Greens criticised the ruling coalition’s budgetary direction, accusing it of misleading voters. Andreas Audretsch, deputy head of the Greens' parliamentary group, claimed that Chancellor Friedrich Merz and Finance Minister Klingbeil are “using tricks to divert tens of billions of euros to consumer spending and voter handouts.”

“Merz and Klingbeil’s financial stunts undermine climate protection and innovation, increase the cost of living, destroy our social infrastructure, and come at the expense of our children’s future,” Audretsch told the Redaktionsnetzwerk Deutschland media group.

By Tamilla Hasanova