German Finance Minister Lars Klingbeil (SPD) presented the federal government’s draft budget for 2027 in the Bundestag on Tuesday, with the government planning more than €200 billion in new borrowing next year. The budget relies on significantly higher debt to finance government responsibilities, while Klingbeil defended the plans as necessary to fund investment, protect the welfare state and strengthen Germany’s defence capabilities.
Under the draft, federal spending in the core budget is set to rise to €555.4 billion in 2027, almost six percent more than in the current year. Net new borrowing in the core federal budget is planned at €118.7 billion, up from €98 billion this year. When the debt-financed special funds for infrastructure and climate neutrality and for the Bundeswehr are included, total new borrowing planned for 2027 comes to €203.7 billion.
“The budget reflects how much things are changing in our country,” Klingbeil said during the Bundestag budget debate. “We are investing in our future, we are investing in our security and we are creating the freedom to act so that we can still take action tomorrow.”
Klingbeil linked the scale of the 2027 budget to the economic and geopolitical challenges facing Germany. He pointed to the country’s weak economy, the energy crisis and Russia’s war against Ukraine as factors affecting the government’s finances and spending priorities.
The finance minister said his draft would provide “a new foundation for growth, employment and social security”. A total of €118 billion in investment is planned for 2027, which Klingbeil described as the “decisive growth stimulus”. The government’s spending plans therefore combine higher borrowing with increased investment, while also maintaining major spending commitments in social security and defence.
A major part of the increase in spending is linked to defence. According to the government’s plans, Germany’s defence expenditure is set to rise to €139.6 billion in 2027, the highest level since the end of the Cold War. Klingbeil defended the additional spending and the borrowing required to finance it. “Defending yourself without new debt is like flying to the moon without a rocket,” he said. The largest individual spending area remains the social budget, which is allocated €201.5 billion under the 2027 plans.
Klingbeil also defended the government’s decision to take on substantially more debt. He argued that the additional borrowing was necessary to finance investment, secure the welfare state and strengthen Germany’s defence. At the same time, the finance minister defended planned reductions in other areas of the budget. He said it was his responsibility to “get the budget under control”.
According to Klingbeil, this means cutting financial assistance and subsidies, particularly in areas “where only a few benefit, but everyone bears the costs”.
The opposition sharply criticised the government’s approach to borrowing and questioned the constitutionality of the 2027 budget. AfD budget spokesman Michael Espendiller accused the government of pushing Germany into a debt trap through its large-scale borrowing. He warned that “the costs of Friedrich Merz’s chancellorship are driving us into ruin”.
Espendiller also accused the coalition of taking on more and more debt while delivering little in return. Describing the approach as a “debt frenzy”, he argued that “we pay more and more and get less and less”. He also criticised the fact that the economy had not picked up despite government spending from the debt-financed special fund.
Green budget spokesman Sebastian Schäfer described Klingbeil’s 2027 draft as unconstitutional. He argued that investment in the budget had been “calculated in a distorted way”. Schäfer also criticised planned cuts affecting families, single parents and housing benefit. “Your budget is cutting away our future,” he said.
Left Party budget spokesman Dietmar Bartsch also criticised the scale of borrowing. He said that no previous federal government had relied more heavily on loans. Bartsch stressed that the Left Party was not opposed to investment, but said that €1 trillion in new debt by 2030 was “simply madness”, referring to the coalition’s projections.
He called for large fortunes and substantial inheritances to contribute more to financing government responsibilities. “Work is heavily taxed in our country, while huge inheritances and fortunes are spared,” Bartsch said.
The budget also received support from CDU budget expert Mathias Middelberg, who defended the draft presented by the SPD-led Finance Ministry. Middelberg said Germany was “back on a growth path after seven years of economic stagnation”. He described this as an achievement of the current federal government and its investment policy.
His comments contrasted with the criticism from opposition budget experts, who questioned whether the government’s spending and borrowing were producing sufficient economic results.
The government’s borrowing plans also mean significantly higher interest expenditure in the coming years. According to Klingbeil’s draft, the federal government has budgeted around €41.9 billion in interest payments in the core budget for 2027. The projected interest costs then rise further, reaching €55.2 billion in 2028, €68.1 billion in 2029 and €80.7 billion in 2030. The figures form part of the government’s longer-term financial planning alongside the rising levels of new borrowing planned for the coming years.
The 2027 budget is not yet final. Following this week’s plenary debates, the draft is scheduled to be sent to the Budget Committee for further consideration. Changes to the government’s proposal could still be made during that process. The final adoption of the federal budget is planned for November.
For 2027, the draft currently combines €555.4 billion in core federal spending, €118.7 billion in net new borrowing and €118 billion in planned investment. Including the debt-financed special funds for infrastructure and climate neutrality and for the Bundeswehr, planned new borrowing rises to €203.7 billion. At the same time, defence spending is set to reach €139.6 billion, while the social budget remains the largest individual spending area at €201.5 billion.
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