Budget 2025: Starting billions in spending for Germany!

Budget 2025: Starting billions in spending for Germany!

On June 23, 2025, Germany's public finances will face a significant change. In the coming years 2025 and 2026, the new black-red coalition plans to significantly increase its budget spending under the motto “Invest, reform, save”. The first official presentation of the government figures for the federal budget will be approved by the Federal Cabinet on Tuesday. As a result of these developments, the era of “broken savings” should finally come to an end.

For 2025, federal spending will be over 500 billion euros, an increase compared to 474 billion euros in 2024. 520 billion euros are even planned for 2026. In order to finance these expenses, new debt of around 143 billion euros is forecast, which corresponds to around 3.5 percent of total economic output. Of this new debt, around 82 billion euros will be used to cover expenses. The increasing military expenses, which are already included in the budget figures, also play a central role in financial planning.

Investments in infrastructure and military

One of the new government's priorities is to boost public investment. These are expected to increase from 75 billion euros in 2024 to over 115 billion euros in 2025. The aim is to promote private investment and encourage companies to make more technical progress. A significant amount under this plan is the use of 3.4 billion euros from the Climate and Transformation Fund (KTF) for the gas storage levy to reduce gas prices. Nevertheless, there are concerns about the availability of sufficient funds to achieve the climate goals, which is criticized by the think tank Agora Energiewende.

Around 100 billion euros are planned for defense and security in the 2025 budget, which makes up around 20 percent of the entire budget. The aim is already to increase military spending to 168 billion euros (approx. 30 percent of the budget) by 2029. To ensure the financing of these increased expenditures, the government can resort to new loans and is also planning to cut spending, particularly in the areas of development aid and citizens' money. Concrete figures on development aid will be published soon, but the Venro association is calling for at least 2.2 billion euros for humanitarian aid and 11.2 billion euros for economic cooperation.

Credits and challenges

However, the federal government also faces major challenges, particularly in the areas of defense and infrastructure. After the debt brake is relaxed in March 2025, extensive credit flexibility will be available. However, these should only be used for central areas such as defense and infrastructure. The goal remains to keep government finances at a solid level and to take EU rules into account. Deficits should be reduced to a level that meets the requirements of sound public finances and EU requirements.

The Bundesbank has suggested further pushing forward the reform of the debt brake in order to set credit limits that are consistent with stability. So far, defense spending that exceeds 1 percent of GDP has been exempt from the debt brake's credit limit. The budget also stipulates that countries can budget for loans amounting to 0.35 percent of GDP annually to finance structural deficits. The need to accelerate planning, approval processes and contract awarding is also emphasized.

Overall, Germany's public finances are at a crucial point, with investments and compliance with strict financial rules being the focus. The coming budget decisions will largely determine how sustainable the German economy remains.