Germany approves 2027 budget with defence surge, social cuts and €118.7bn in new borrowing
The German cabinet approved a 2027 federal budget draft with spending of €555.4 billion, a sharp increase in defence outlays, and net borrowing of €118.7 billion, as Finance Minister Lars Klingbeil argued the country must catch up on decades of military underinvestment.
Defence spending surge
The core defence budget for 2027 is set at €109.7 billion, a third more than in 2026. Including the Bundeswehr special fund, total defence spending reaches almost €140 billion. The government plans to raise defence outlays to €183.7 billion by 2030, aiming to lift the NATO spending target from 2.8 percent to 3.5 percent of GDP by 2029. Military aid for Ukraine is budgeted at €11.6 billion in 2027, falling to €8.5 billion annually thereafter.
We have to catch up in the shortest time on three decades in which our Bundeswehr was cut back.
Social cuts and tax increases
To help close a €34.3 billion gap, the government is cutting a €25 monthly supplement for children in poverty, saving €450 million a year. Subsidies to the pension and statutory health insurance systems will also be reduced, and spending from the Climate and Transformation Fund (KTF) will be trimmed. On the revenue side, higher taxes on alcohol and tobacco are planned, along with a new plastic levy. The labour and social affairs budget remains the largest single item at €201.5 billion, crossing the €200 billion mark for the first time.
- 2027
- 109.7 € billion
- 2030
- 183.7 € billion
Debt and interest burden
Total new borrowing in 2027 will reach €203.7 billion, combining €118.7 billion in the core budget, €54.9 billion for the infrastructure special fund, and €30 billion for the Bundeswehr special fund. Net borrowing in the core budget alone rises from €98 billion in 2026 to €118.7 billion. As a result, interest payments are projected to nearly double from €41.9 billion in 2027 to €80.7 billion by 2030. The government is also drawing €6.8 billion from reserves built up until 2019, redirecting €2.7 billion in emissions trading revenues from the KTF, and postponing repayment of corona-era loans to 2033–2060.
- 2026 Total spending
- 524.5 € billion
- 2027 Total spending
- 555.4 € billion
- 2026 Net borrowing
- 98 € billion
- 2027 Net borrowing
- 118.7 € billion
Political justification
Finance Minister Klingbeil, who also leads the SPD, defended the borrowing by pointing to the security threat from Russia, the economic impact of the Iran war, high energy prices, and a weak economy. He dismissed the idea of a balanced budget as inadequate for defence needs.
We cannot defend ourselves against Putin with a balanced budget.
Opposition parties have criticised the scale of new debt, noting that every eighth euro in the core budget is borrowed. The cabinet also decided to decide by 15 July which specific climate and transformation programmes will face cuts.
