Germany plans 110 billion euros in new debt for 2027 budget

By Ahmet Taş | Wise News Press

BERLIN, GERMANY — The German cabinet has approved the outlines of the 2027 federal budget, authorizing 543.3 billion euros in centralized spending while pushing new core borrowing to a staggering 110.8 billion euros.

Despite planned austerity measures and structural savings across various ministries, the government is leaning heavily into debt to finance rapidly growing defense requirements and soaring social welfare costs. The budget draft, prepared by Finance Minister Lars Klingbeil, outlines a challenging fiscal roadmap that has already sparked severe criticism from opposition parties and humanitarian organizations concerning the broader European economic policies.

Labor and defense budgets surge

The Ministry of Labor continues to represent the largest single expense in the federal budget by a significant margin. According to the approved outlines, the labor budget will cross the 200 billion euro threshold for the first time, reaching 201.2 billion euros in 2027. This figure is expected to climb steadily, hitting 233.5 billion euros by 2030.

Simultaneously, military expenditures are undergoing a massive expansion. The defense budget is set to increase from 105.8 billion euros in 2027 to an unprecedented 179.9 billion euros in 2030. For comparison, defense spending for the current year stands at 100.9 billion euros.

Massive financing gaps loom

The core budget's net borrowing is planned at 110.8 billion euros for 2027, with projections indicating it will reach 152.7 billion euros by 2030. When factoring in loans from debt-financed special funds, the government envisions a total new borrowing package of 196.5 billion euros for 2027 alone. Officials confirmed that the regular credit limit under the constitutional debt brake will be fully utilized across all upcoming fiscal years.

Long-term planning up to 2030 reveals significant funding shortfalls. A financial gap of approximately 29 billion euros is anticipated for 2028. Furthermore, by 2030, a staggering 78.7 billion euros—equivalent to more than one-eighth of the entire federal budget—will be allocated solely for interest payments on national debt.

New plastic and sugar taxes introduced

To offset some of these rising costs, structural savings totaling approximately 4 billion euros annually are planned across all federal ministries. These measures include comprehensive reforms and targeted cuts in social assistance programs.

In a push to generate additional revenue and promote public health and environmental sustainability, the government is introducing a new plastic tax and a sugar tax. Furthermore, scheduled increases in alcohol and tobacco taxes are included in the upcoming fiscal framework.

Chancellor Merz defends military spending

In his first public statement regarding the budget resolution, Chancellor Friedrich Merz strongly defended the rapidly accelerating defense expenditures. Speaking in Berlin, Merz emphasized that there are critical areas requiring "much more money than initially planned."

According to Chancellor Merz, geopolitical instability and the events that have unfolded in Iran over the past year and recent months have definitively proven "how crucial investments in defense capacity are" for the nation's security.

Opposition and NGOs issue warnings

The cabinet's budgetary decisions have drawn fierce backlash from the political opposition. Left Party (Die Linke) Parliamentary Group Leader Sören Pellmann heavily criticized the allocation of funds.

"Savings and cuts in all areas outside of defense are being placed squarely on the shoulders of the citizens," Pellmann stated.

Humanitarian sectors are equally alarmed. A coalition of 150 development and aid organizations, prominently including Welthungerhilfe and Oxfam, issued a joint appeal warning of the dire consequences of the planned austerity measures. The organizations stressed that cuts to development cooperation and humanitarian aid will directly endanger human lives. According to the current draft, the budget for the Federal Ministry for Economic Cooperation and Development (BMZ) is slated to be slashed by approximately 600 million euros.

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