According to the Freiburg Subsidy Report, presented in Berlin on Tuesday, the German state plans to provide a total of 321 billion euros in subsidies in 2026. This sum represents seven percent of the gross domestic product, equating to approximately 7,000 euros per working citizen. This figure is noted to be slightly lower than the peak amount reached in 2023, which was partly influenced by the pandemic.
Of the total 321 billion euros, 235 billion euros are allocated at the federal level. A significant portion of this total is earmarked for financial assistance, amounting to 150 billion euros-a triple increase compared to the level seen a decade ago. Lars Feld, an economist from the Walter Eucken Institute, criticized this funding structure, arguing that three-quarters of this financial support lacks strong economic justification and is now financed to an extent (42 percent) outside the core budget. The remaining 85 billion euros cover tax incentives, which Feld pointed out mainly benefit large corporations rather than the small and medium-sized enterprises.
Feld further argued that the high subsidy amounts have failed to demonstrate positive growth effects. He cited the declining reliability of Deutsche Bahn despite substantial investments in the rail network. While environmental subsidies have risen sharply-by 3.5 times since 2022-he warned that other forms of subsidies counteract this positive impact. Based on these observations, Feld recommends that the government implement uniform subsidy reductions, lower taxes, and reduce regulatory burdens.
