German Finance Minister Plans Record New Debt for 2027 Budget

German Finance Minister Lars Klingbeil has unveiled a draft budget for 2027 that projects new borrowing of nearly 204 billion euros, a figure that would represent the second-highest level of new debt in Germany's post-war history. The government's plan, obtained by Die Zeit, outlines total expenditures of 555.4 billion euros for the core budget, with a net borrowing requirement of 118.7 billion euros.

The overall new debt figure of 203.7 billion euros includes additional borrowing from two special funds: the Infrastructure and Climate Neutrality Special Fund, which accounts for 54.9 billion euros, and the Bundeswehr (armed forces) fund, adding another 30 billion euros. This proposed borrowing is approximately 8 billion euros higher than initially planned by the government in late April.

To manage the budget, Klingbeil's proposal necessitates drawing down reserves accumulated during more economically robust periods prior to 2019, with 6.8 billion euros slated for use. Additionally, spending from the Climate and Transformation Fund is set to be reduced. These measures are reportedly necessary due to a significant deficit within the Federal Employment Agency and insufficient revenue from planned tax increases, including higher alcohol and plastic taxes, and stricter tax enforcement.

Defense spending is projected to rise to approximately 109.7 billion euros in 2027. However, total investments, including infrastructure projects, are expected to decrease by about 700 million euros compared to the current year, reaching 117.5 billion euros. The cabinet is scheduled to hold a final discussion on Klingbeil's proposal on July 6.