Debt brake in Germany: climate protection or financial chaos?

Debt brake in Germany: climate protection or financial chaos?

On June 21, 2025, a new debate arose in Germany about the financing of climate protection. In March, the debt brake in the Basic Law, specifically in Articles 109 and 143h, was weakened by a red-black-green majority in the Bundestag. This was done with the aim of creating more scope for necessary investments in infrastructure and climate neutrality by 2045. A debt-financed special fund of up to 500 billion euros has been set up, which will be used for this purpose in the future. But critics fear that climate goals could actually be hindered by the new regulation.

The planned additions from the special fund to the Climate and Transformation Fund (KTF) amount to 100 billion euros, which can be used for private investments and loans, for example for the purchase of electric cars. Since 2016, around 2.1 million electric and plug-in hybrid cars have been supported through environmental bonuses, costing around ten billion euros. In addition, environmental and climate protection has been anchored as a state goal in the German Basic Law since 1994. This goal was underpinned by the Federal Constitutional Court's 2021 climate decision, which calls for a legal interpretation of climate neutrality.

Investment requirements have increased sharply

The current situation shows that climate protection in Germany has actually become a major financial construction site. Estimates from research institutes put the additional investment requirement at at least 600 billion euros over the next ten years, which corresponds to an annual requirement of around 60 billion euros. Some experts even estimate it to be around 100 billion euros per year. In comparison, the current federal budget is 450 billion euros per year, which illustrates the scale of the problem.

Ulrich Klüh from the Darmstadt University of Applied Sciences describes the estimates as conservative and calls for loans as a means of financing. Germany is currently benefiting from low interest rates on debt, which is inspiring confidence in the financial markets. If there is insufficient investment, experts like Matthias Kalkuhl from PIK warn, high levels of climate damage and political instability could result.

Challenges of the debt brake

The debt brake in the Basic Law represents a significant hurdle for taking out new loans. While the Left is calling for this regulation to be abolished, the Union, FDP and AfD are calling for it to be retained. The SPD and the Greens, on the other hand, are planning reforms and are considering a “Germany Fund” to finance necessary investments through loans. Possible new coalitions could even consider creating dedicated climate and security debt. However, Ulrich Klüh advocates abolishing the debt brake instead of new special budgets.

The Expert Council for Climate Issues has already assessed the legal requirements for climate protection as inadequate. Regulations and guidelines could give NGOs more opportunities to sue, which could lead to delays and additional costs. In addition, the new requirements restrict the planning freedom of applicants. The challenge remains to find a balance between necessary investments and the strict financial requirements.