Finance Minister Klingbeil presents draft debt for the military and infrastructure

Finance Minister Klingbeil presents draft debt for the military and infrastructure

Finance Minister Lars Klingbeil presented his first budget draft for 2025 today. This draft marks a significant change in direction from the traffic light coalition's financial policy, which was previously dominated by the Free Democrats. A central element of the budget is extensive investments in the areas of defense, infrastructure and the economy. In addition, the cabinet has decided on key figures for 2026 and a rough financial plan until 2029, which provides for debt financing using a special fund.

According to official figures, total spending in the budget for 2025 is expected to be 503 billion euros. Of this, 81.8 billion euros are planned for new debt in the core budget, which is more than double the new debt in the previous year. In addition, over 60 billion euros are planned for debt-financed special funds. A particular focus is on defense spending, for which 75 billion euros are allocated, including 32 billion euros financed from debt.

Defense spending in focus

Defense spending in the federal budget meets the NATO two percent quota and is 2.4 percent of gross domestic product (GDP). The planned increase in defense spending is part of a broader strategy to raise its target to 3.5 percent of GDP by 2029. Compared to the previous year, this means an almost tripling of funds for the Bundeswehr, civil protection and the intelligence services. Defense spending totaling 152.8 billion euros is planned by 2029, which represents a massive increase.

Chancellor Friedrich Merz stated that every additional percentage point increase in defense spending would cost around 45 billion euros more. The goal of meeting NATO requirements is further reinforced by calls from the US president for greater defense spending in Europe. Germany had a defense spending ratio of 2.1 percent last year; The targeted increase to 5 percent would require 225 billion euros annually.

Criticism and challenges

The financial policy that comes into play in the new budget draft is viewed critically by various political camps. A particular accusation is directed against the excessiveness of the budget plans and alleged budget trickery. The Greens, the Left and the BSW express concerns about the sustainability of the high level of debt. By 2029, new debt is expected to rise to almost 850 billion euros, with an expected interest burden of 215 billion euros.

Other important points in the budget include a budget of around 22 billion euros for rail infrastructure and four billion euros for social housing and urban development funding. The cabinet has also presented a rough plan for 2026, in which spending is expected to rise to 519.5 billion euros, with an increasing share to be financed through loans in the core budget.

The draft budget will be discussed in the Bundestag before the summer break and is expected to be passed by mid-September. The future of German financial and defense policy is therefore facing crucial decisions that could have far-reaching consequences both nationally and internationally.

For more information read the reports at South Germans and MDR.