German Finance Minister Lars Klingbeil stated that significant investments are being made for the country's security and resilience. Emphasizing that peace in Europe is threatened by Russia's aggression, Klingbeil said that a balanced budget would not be sufficient to defend Germany.
The German Ministry of Finance announced that the Cabinet approved the draft federal budget for 2027, which foresees €203.6 billion in new borrowing, and the financial plan until 2030. The draft budget aims to increase total expenditures from €524.5 billion to €555.4 billion and prioritizes defense spending.
According to official budget projections, total expenditures are expected to rise from €555.4 billion in 2027 to €635.4 billion in 2030. Tax revenues are projected to increase from €394.7 billion in 2027 to €437.3 billion in 2030.
Increase in Defense Spending
According to the 2027 budget draft, the Ministry of Defense's budget will increase from €82.7 billion to €109.7 billion. Defense spending is planned to reach €153.9 billion in 2028 and €183.7 billion in 2030. With this increase, the government aims to raise NATO's defense spending target to 3.5% of GDP by 2029. Military and logistical support for Ukraine is maintained at €11.6 billion in the 2027 budget.
Military and logistical support for Ukraine is maintained at €11.6 billion in the 2027 budget.
Additional Taxes and Cuts to Close the Deficit
Net borrowing in the federal government's core budget is expected to reach €118.7 billion in 2027. When the special fund for the German Armed Forces, infrastructure, and climate protection items are included, the total new debt burden amounts to €203.6 billion. There is still a budget deficit of approximately €107 billion in the medium-term financial plan.
The government has implemented additional measures to close the 2027 budget deficit. Taxes on alcohol, sparkling wine, and pre-mixed drinks will be increased by 20%, targeting an additional revenue of €455 million. Federal subsidies to the pension insurance system will be reduced by €1 billion, and savings of €450 million will be made by removing emergency additional support for child benefits. Transferring €2.7 billion from the Climate and Transformation Fund to the core budget and postponing the repayment of the special fund for the army until 2033 are also among the budget balancing measures.
figure class="wp-block-image" data-align="center" style="text-align: center;">
"Requires Making Difficult Decisions"
Finance Minister Klingbeil stated that they want to put Germany back on a growth path and create future employment. Klingbeil said, "We are making significant investments for our country's security, resilience, and defense. Peace in Europe is threatened by Russia's aggression, and a balanced budget will not be enough to defend Germany. We must close the investment deficit accumulated over the last 30 years in our defense capabilities in a very short time. As Finance Minister, it is my duty to put the budget in order, and this process requires making difficult decisions. We cannot continue as we have for the last 20 years. Today's budget consolidation will secure tomorrow's freedom."
figure class="wp-block-image" data-align="center" style="text-align: center;">
Budget Draft Draws Reactions from Business and Unions
The 2027 budget draft approved by the German government has drawn sharp criticism from business associations, unions, and environmental organizations. German businesses have accused the coalition of pursuing a dangerous debt policy, calling the government's austerity claims "window dressing."
Tanja Gönner, Chief Executive Officer of the Federation of German Industries (BDI), described the increase in expenditures and borrowing as "worrying." Gönner warned that interest costs are rising rapidly and that nearly one-fifth of tax revenues could go towards interest payments by 2030.
Stefan Körzell, a member of the Executive Board of the German Trade Union Confederation (DGB), criticized the use of social welfare benefits for budget consolidation while military spending is massively increased, calling it a "major imbalance." Körzell also viewed the cuts in climate and transformation funds as a step that jeopardizes the country's future. He argued that instead of closing budget deficits with climate funds, subsidies for company cars and kerosene should be reduced.
The Federation for Environment and Nature Conservation Germany (BUND) interpreted the plans as an attack on climate protection policies. The coalition's plan to implement a sugar tax on beverages starting January 1, 2027, has also increased unease within the business community.
figure class="wp-block-gallery has-nested-images columns-default is-cropped" data-editor-block="gallery">
Comments
…Loading comments…