Germany’s cabinet approved the 2026 draft budget on Wednesday, which includes a record investment of €126.7 billion ($146.41 billion). The plan marks a clear shift from the country’s traditionally cautious fiscal approach, as Europe’s largest economy seeks to revive growth, overhaul its ageing infrastructure and significantly boost defence spending.
Germany’s 2026 draft budget signals a dramatic fiscal shift, with borrowing set to soar to €174.3 billion, more than triple the €50.5 billion borrowed in 2024 under the previous government.
Investments to rise 10 percent
The spending plan, which is part of a medium-term financial framework running through 2029, outlines total expenditures of €520.5 billion. Interest expenses will rise more sharply than previously forecast, with an increase to €66.5 billion in 2029 from the previously expected €61.9 billion.
The planned investments also mark a 10 percent increase over 2025 and follow a 55 percent increase compared to 2024. Despite the planned total new debt of €851 billion from 2025 to 2029, there is still a deficit of around €172 billion for the years 2027 to 2029.
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Infrastructure fund to boost borrowing by €58.9 billion
The investment surge in Germany’s 2026 draft budget is supported by a €500 billion infrastructure fund and an exemption from debt rules for defence spending approved in March.
The special fund for infrastructure, which is excluded from Germany’s “debt brake” that limits borrowing to 0.35 percent of GDP, will add borrowing of €58.9 billion in 2026.
Germany also plans €117.2 billion in defence spending in 2026, an amount that will go up to €161.8 billion in 2029, the mid-term fiscal plan shows. Berlin would be able to borrow a total €380 billion for defence between 2025 and 2029, thanks to the debt brake reform from March.
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