German Cabinet Approves 2027 Budget with €203 B Borrowing

The German cabinet approved a draft federal budget for 2027 on Monday, July 6, committing to a significant increase in borrowing and spending, with a sharp focus on defense and infrastructure. The plan marks a decisive shift away from the country's long-standing fiscal restraint.

Total spending for 2027 is projected at 555.4 billion euros, with new net borrowing exceeding 203 billion euros. This borrowing is higher than the 196.5 billion euros initially projected in April and is divided into three parts: 118.7 billion euros for the core budget, 54.9 billion euros via an infrastructure fund, and 30 billion euros from a special defense fund. Finance Minister Lars Klingbeil defended the plan, stating the government had managed to eliminate a 34-billion-euro shortfall for the year while prioritizing national security and economic resilience.

A central pillar of the budget is a major increase in defense expenditure. Core defense spending is set to rise to approximately 109 billion euros in 2027, a roughly 33 percent increase from 2026. When including support for Ukraine and other security-related spending, the total defense outlay reaches 130.1 billion euros. Klingbeil cited the...