Amid heavy criticism, the German government has pushed through its draft budget for 2027. The federal cabinet approved the budget of Finance Minister Lars Klingbeil (SPD) on Monday. It provides for total expenditure of €555.4 billion and new borrowing of over €200 billion. Klingbeil justified the plan by pointing to the weak economic situation and the consequences of the wars in Iran and Ukraine.
The priority, Klingbeil said when presenting the budget, was to bring "our country back onto a growth path" and to create "jobs of the future in Germany." At the same time, he said, the government must further significantly increase its defense spending while also consolidating the budget, a combination that required "tough decisions."
"Peace in Europe is more threatened than it has been in a long time by Putin's imperialist delusion," Klingbeil stressed. Germany, he said, must make up for decades in which its defense capability had been neglected. "Not taking on new debt in this situation is not possible: it's like trying to fly to the moon without a rocket."
Under the draft, Defense Minister Boris Pistorius (SPD) will have €109.75 billion available next year, an increase of 32.7 percent. Including funds from the Bundeswehr special fund, the defense ministry's budget will reach a total volume of almost €140 billion next year.
Klingbeil also pointed out that, "despite the international crises," the government had managed to close the original budget gap of €34 billion for next year. A series of measures would be implemented to achieve this, including savings within the ministries.
However, savings contributions from the ministries fell short of Klingbeil's expectations in some areas. The finance minister announced that after a one-percent savings target this year, the ministries would have to cut a further two percent in 2028, since a budget gap of at least €22 billion still remains there as well.
Klingbeil stressed that financial aid in the budget would be cut "with the intelligent lawnmower", applying reductions broadly rather than through isolated cuts. At the same time, taxes on spirits, alcoholic mixed drinks and tobacco will rise, and a new sugar tax will be introduced. This, he said, also serves to protect public health: "What makes you sick will therefore become more expensive."
The Federation of German Industries (BDI) described the budget's spending and debt increases as "alarming." The German Chamber of Industry and Commerce (DIHK) said the budget's trajectory was worrying businesses: "Social spending, defense and interest payments will together already tie up 80 percent of the budget by 2030. That leaves hardly any room for growth-relevant spending."
"It is unacceptable that welfare-state benefits, in health, housing, family and other areas, should be used to fund the budget's consolidation," countered the German Trade Union Confederation (DGB), which accused the government of "policy dictated by the state of the coffers" and called on it to strengthen the welfare state. Left Party leader Ines Schwerdtner called on Klingbeil to stop the "arms race spiral" and to invest more in social security instead.
Planned cuts to housing benefit under the Federal Ministry of Construction now come in somewhat lower, at €738 million. Initially, as in the following years, cuts of €1 billion had been planned, with the states expected to drop an equivalent amount. According to the federal government, a third of current housing benefit recipients will, as a result of the reform, "no longer receive housing benefit in future."
Criticism was especially harsh over Klingbeil's decision to shift €2.7 billion from the Climate and Transformation Fund (KTF) into the regular budget. Environmental group BUND called it an "attack on climate protection." Green Party leader Felix Banaszak said the money was being "misused to plug holes in the budget."
Klingbeil rejected the criticism: if €34 billion had to be saved in the budget, he argued, the KTF had to contribute too. "This is happening moderately, this is happening sustainably, this has no impact whatsoever on the climate targets."
The transport budget foresees around €1 billion less for rail. Rail industry association VDV called it a "catastrophe for rail." The German Transport Forum (DVF) warned that future investments risk being "neglected," noting that overall, less funding will be available for maintaining and expanding transport infrastructure than in the current 2026 budget year.
Aid organizations and associations, meanwhile, criticized further cuts to development aid. Umbrella organization Venro warned of "dramatic consequences," noting that cuts to development aid worldwide could contribute to more than 9.4 million additional deaths by 2030 from poverty, hunger, disease and climate change.
Germany's Federal Ministry for Economic Cooperation and Development acknowledged the cuts were difficult, but said the budget provided "the necessary basis for deploying our funds specifically where they make the biggest difference."
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