Federal Finance Minister Lars Klingbeil (SPD) defended the increased net borrowing in the 2027 budget draft, citing the essential need to invest in defense and security. Speaking on Monday in Berlin during the presentation of the draft, Klingbeil argued that “we cannot defend Germany against Putin with a black zero” (i.e., balanced budget). The minister added that peace in Europe is currently “threatened by the Russian aggression,” insisting that Germany needs to “catch up three decades in the shortest possible time” where investment in its defensive capability was lacking, an issue compounded by the economic burden placed on Germany by the Iran-Iraq conflict.
The draft for the Federal Budget 2027 projects net borrowing of nearly €200 billion. Next year, core budget expenditures are set at €555.4 billion, marking a significant increase of almost €30 billion compared to the current year. The net debt assumption for 2027 is €118.7 billion, which will be supplemented by additional debt from special funds allocated for infrastructure, climate neutrality, and the Federal Armed Forces (Bundeswehr).
Defense spending is set to increase notably. The defense budget rises from €82.7 billion in 2026 to €109.7 billion next year, with plans for a further substantial jump to €153.9 billion by 2028.
To accommodate the financial requirements, the government plans to implement cuts in social areas, raise taxes, and utilize existing reserves. To provide relief, savings are anticipated within the pension and health insurance systems, alongside reforms to housing and parental benefit schemes. Additionally, tax measures such as the introduction of a plastic tax and increases in alcohol and tobacco duties are scheduled. Despite these measures, the financial plan currently shows a deficit exceeding €100 billion.
