Germany Faces a EUR171 Billion Budget Shortfall
Berlin - New alarming figures from the federal budget indicate that Germany is facing a shortfall of EUR171 billion, significantly exceeding previous estimates. The draft budget for the upcoming year, 2026, is prepared for discussion, with Finance Minister Lars Klingbeil expected to present it to the cabinet on Wednesday, aiming to finalize the financial planning through to 2029.
Recent assessments reveal an additional EUR27 billion gap compared to earlier projections. When Minister Klingbeil initially introduced the 2025 budget to Parliament five weeks ago, he anticipated a deficit of EUR144 billion through 2029. However, the gap has widened due to various concessions made to state governments, especially as part of the economic stimulus package, as well as updated interest expenditures. Additionally, the government has decided to advance the new maternity pension by one year to 2027, adding an immediate cost of EUR5 billion.
The implications are clear: the coalition government must find ways to either cut EUR171 billion from spending or increase tax revenues by the end of 2029. According to the finance ministry, the required savings are substantial, with specific targets set for the coming years: EUR34 billion in 2027, EUR63 billion in 2028, and EUR74 billion in 2029.
The finance ministry has labeled the current deficit as "very high," identifying it as the central financial challenge for the government in the coming years. Plans for budget cuts include a two percent reduction in personnel costs across ministries and a ten percent cut in administrative expenses. Furthermore, funding for various support programs and development expenditures is set to be reduced by EUR1 billion each.
Despite these measures, officials express concerns that these efforts alone may not suffice to close the budget gap. The finance ministry is also relying on expert commissions to propose reforms in key areas such as healthcare, pensions, and the social welfare system, which they believe will play a critical role in achieving budgetary consolidation.
Discussions in the Bundestag regarding the budget are scheduled to begin on September 23, with a final vote planned for November 28. Overall, the federal government is intending to spend EUR520.5 billion, marking an increase of 3.5 percent from the previous year.
In light of the significant financial shortfall, the government plans to incur substantial debt. In the next fiscal year, it is projected that EUR174.3 billion will be borrowed, which includes EUR89.9 billion from the regular budget and EUR84.4 billion from special funds for infrastructure and defense. Projections for future years indicate that debt levels will continue to rise, with expected borrowings of EUR172.6 billion in 2027, EUR174.9 billion in 2028, and EUR186.1 billion in 2029. This trajectory suggests that total planned debt could reach EUR851 billion by the end of the period.