German Government Approves 2027 Federal Budget with Increased Military Spending
The German government has approved the draft federal budget for 2027, setting total expenditures at 555.4 billion euros. This figure marks an increase of 12 billion euros compared to earlier projections in April and represents more than 30 billion euros above the current year's budget. The Ministry of Finance attributes this budget expansion to ongoing global conflicts, notably the Iran war, higher energy costs, and a sluggish domestic economy.
The newly proposed budget anticipates net new borrowing of 118.7 billion euros, exceeding initial targets by nearly 8 billion euros. Additional debt from special funds for infrastructure, climate neutrality, and national defense brings the total projected new borrowing for 2027 to over 200 billion euros, with a gradual rise to 219.5 billion euros by 2030. The budget is scheduled for parliamentary review after the summer recess, with final approval expected by the end of November.
A substantial portion of the increased spending is allocated to defense. The core 2027 budget earmarks approximately 109.7 billion euros for defense--a 33% increase compared to the previous year. Additional funds, estimated at around 30 billion euros, are expected to come from the special Bundeswehr fund. While most budget items remain subject to Germany's constitutional debt brake, defense and security spending up to one percent of GDP are exempted.
These increases have prompted criticism from various political and social groups. Some argue that prioritizing military expenditure could benefit large defense corporations, while essential areas such as disaster relief remain underfunded. Recent extreme weather events have highlighted the need for greater investment in these sectors, according to critics.
Labor unions have welcomed the government's plans for record investment in infrastructure--117.5 billion euros in 2027--targeting projects such as bridge repairs, road maintenance, and rail system upgrades. However, unions have also expressed concerns that the budget creates an imbalance, with long-term defense allocations overshadowing time-limited infrastructure investments. They have called for stronger commitments to social services, including healthcare, housing, and family support, warning that reductions in these areas could undermine public confidence and domestic demand.
The budget proposes several revenue-raising measures, including a new levy on plastic products and higher tobacco and alcohol taxes. To achieve savings, the government plans to reduce federal contributions to pension and health insurance schemes and scale back financial aid from the Climate and Transformation Fund (KTF), which supports climate-friendly industry initiatives and decarbonization projects. Decisions on specific cuts within these programs are expected by mid-July.
The planned reductions, particularly those affecting the KTF, have drawn criticism from coalition partners. Some have argued that diverting funds intended for climate initiatives to cover budget shortfalls risks undermining Germany's energy transition and eroding trust in government commitments to climate policy. The KTF, funded mainly through EU emissions trading revenues, is designed to support the shift to a climate-neutral economy and to help offset the costs of climate measures for citizens and businesses.
Development and humanitarian aid organizations have also voiced strong objections to the proposed budget. A coalition of approximately 20 NGOs demonstrated in Berlin, highlighting reductions in the budget for the Federal Ministry for Economic Cooperation and Development (BMZ). Since 2023, the BMZ budget has reportedly been cut by nearly 20%, reaching its lowest share of the federal budget in a decade and a half. Humanitarian aid allocations have been reduced by half compared to 2024, now totaling around one billion euros. Organizations warn that these cuts could have severe global consequences, estimating that millions of preventable deaths, including among young children, could occur if support is not maintained.
Looking ahead, the federal government faces ongoing fiscal challenges. Cabinet documents indicate that the budget gap is projected to widen, with shortfalls of 22 billion euros in 2028, 38 billion euros in 2029, and 47 billion euros by 2030. Rising interest payments are cited as a major factor contributing to these deficits.