German government approves 2026 budget - Borrowing triples. Record investments in defense and infrastructure
The German cabinet approved a draft 2026 budget that includes record investment and three times more borrowing than last year. Europe's largest economy is shedding decades of fiscal conservatism in a bid to revive growth, modernize declining infrastructure and boost military spending.
The government will borrow 174.3 billion euros in 2026, compared to 50.5 billion euros in 2024, while investments will reach 126.7 billion euros, the highest figure ever.
In the budget bill, all ministries are required to limit and carefully control spending. Interest costs will rise to 66.5 billion euros in 2029, compared to 61.9 billion previously projected.
The 2026 draft budget, part of a medium-term financial framework extending until 2029, allocates total expenditures of 520.5 billion euros. The planned investments mark a 10% increase compared to 2025 and follow a 55% increase compared to 2024.
Despite the planned total new debt of 851 billion euros in the period from 2025 to 2029, there is still a deficit of around 172 billion euros for the years 2027 to 2029.
The investment boost is supported by a €500 billion infrastructure fund and an exemption from debt rules for defense spending that were approved in March. The infrastructure fund, which is exempt from the "debt brake," will add €58.9 billion in borrowing by 2026.
Germany plans 117.2 billion euros in defense spending in 2026, a sum that will rise to 161.8 billion euros in 2029, according to the medium-term fiscal plan. Berlin will be able to borrow a total of 380 billion euros for defense between 2025 and 2029 thanks to the debt brake reform. After cabinet approval, discussions on the budget will begin in parliament at the end of September, with final approval expected by the end of the year.
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