Germany's 2027 budget: A record €561 billion and a mountain of debt
The 2027 federal budget proposal has finally been hammered out and is set for a vote in parliament. What are the government's policy priorities in defense, infrastructure, the economy and social spending?
On Friday morning, the Bundestag's Budget Committee finalized their deliberations on Germany's 2027 draft budget. The final vote will take place on November 27, following a 16-hour negotiation session involving the conservative Christian Democratic Union (CDU), Christian Social Union (CSU), center-left Social Democratic Party (SPD), and opposition parties.
The draft budget allocates around €561 billion for federal spending next year. However, this figure falls short of generating sufficient revenue to cover expenses, necessitating €123 billion in borrowing. Altogether, the debt reached a record high of over €210 billion, the second-highest in German history, surpassed only by the COVID-19 pandemic borrowing in 2021.
Opposition parties condemned the government's budgetary approach, describing it as a "gigantic mountain of debt," an "untrustworthy budget," "irresponsible policies," and lacking "future prospects." Germany's debt is fueled by defense spending in response to Russia's war on Ukraine, infrastructure renovation, the aging population, rapid economic decline, and the energy transition.
Security and defense spending will see a substantial increase of €27 billion, with the defense budget set to reach nearly €110 billion. Meanwhile, the Ministry of Labor and Social Affairs is projected to spend over €200 billion, highlighting the growing burden of old-age pension benefits. The pension system faces significant challenges, as the workforce is shrinking due to declining birth rates, and government subsidies may need to cover up to 20% of gross salary.
Despite the alarming debt level, Germany remains relatively stable compared to other nations with higher debt-to-GDP ratios. The German Council of Economic Experts has cautioned that continued debt accumulation could lead to a dangerous situation if left unchecked.
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