The federal government’s financial planning appears to violate the joint fiscal guidelines established by the federal government and the states. This issue was detailed in the latest “Federal Report to the Stability Council,” which Finance Minister Lars Klingbeil (SPD) recently sent to his state counterparts, as reported by the “Süddeutsche Zeitung”.
According to the report, the federal government could fail to meet one standard in the current year and one in the next, and potentially three out of the four stability criteria from 2028 onwards. Formally, the Stability Council-composed of representatives from the federal government and the states-now needs to determine if the federal government faces a “budgetary difficulty,” a situation Klingbeil’s office acknowledges in the report. Theoretically, the Council could subsequently impose spending limits on the federal government.
In previous meetings with state colleagues, Klingbeil had acknowledged that his financial planning for the years 2026 through 2030 exhibited “notable features,” according to the “Süddeutsche Zeitung”. However, he pointed to a specific factor that most of the state colleagues also recognize and which is likely to prevent spending restrictions: since 2025, the government has been spending tens of billions of euros annually in addition to the modernization of the Bundeswehr (German Armed Forces). While this extraordinary spending means certain federal metrics are red instead of green, it is legally permissible. According to the Basic Law, the necessary funds can be borrowed beyond the debt brake-otherwise, the program could not be financed at all. Despite this legal validity, however, the arrangement still impacts important fiscal assessment figures, as detailed in the Stability Report.
The European Commission, which regularly reviews the financial management of all 27 member states, has established a special exception for excessive defense spending. Germany utilizes this exception, just as many other nations do. However, the system for monitoring finances domestically lacks a similar clause. This omission means that while Klingbeil has no issues with Brussels, he does have problems with the Stability Council, which he also co-chairs.
Instead of referring this matter to the Council’s “Evaluation Committee,” the government plans to amend domestic regulations through an “express procedure” to bring them into alignment with EU rules. If this effort succeeds, the new regulations could potentially be approved at the next meeting of the Stability Council on December 3rd.
