Germany’s parliament on Thursday approved the 2025 federal budget, the first annual budget following sweeping reforms earlier this year that loosened long-standing fiscal rules.
The budget secures record public investments while committing to increased defence spending, marking what Finance Minister Lars Klingbeil called a “huge paradigm shift in German fiscal policy,” News.Az reports, citing Reuters
The 2025 budget plans nearly €116 billion ($137 billion) in investments, funded by a €500-billion infrastructure fund and a special exemption from debt rules for defence. The measures aim to revive Europe’s largest economy, which has been operating on a provisional budget since last November following the collapse of the former coalition government.
Alongside economic stimulus, Germany has boosted its defence budget, intended to strengthen support for Ukraine and meet NATO spending targets. The core 2025 budget covers €502.5 billion in spending, with total allocations rising to €591 billion after including the infrastructure and defence funds.
The government plans to borrow €81.8 billion for the core budget, rising to €143.2 billion when special funds are included. While the 2025 plan is now secure, Chancellor Friedrich Merz’s coalition faces challenging discussions on future budgets, particularly for 2026 and 2027. The coalition is currently confronting a €30 billion gap in the 2027 financial plan, with potential debates over welfare cuts and fiscal savings.
Finance Minister Klingbeil expressed confidence, saying, “We will have to deal with huge challenges there, but a solution will be found.” Debate on the 2026 draft budget is set to begin next week, with final approval expected in November.
