German Cabinet passes 2025 draft Budget and framework for 2026 with investment surge
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“By 2029, we will increase the federal government’s annual investments to almost €120 billion (S$178 billion) per year,” said German Finance Minister Lars Klingbeil (left), seen with German Chancellor Friedrich Merz.
PHOTO: REUTERS
BERLIN – Germany’s Cabinet on June 24 approved a draft Budget for 2025 and a Budget framework for 2026 with record investments in both years to stimulate growth after Europe’s biggest economy failed to grow for two consecutive years.
The drafts include investments of €115.7 billion (S$171.9 billion) in 2025 and €123.6 billion in 2026, up from €74.5 billion in 2024.
“By 2029, we will increase the federal government’s annual investments to almost €120 billion per year,” Germany’s Finance Minister Lars Klingbeil said on June 24.
The draft Budget for 2025 also includes the mid-term financial plan until 2029, which shows that Germany will raise defence spending to 3.5 per cent of economic output by 2029, funded through a nearly €400 billion borrowing programme.
Germany’s total defence spending will go up from €95 billion in the draft Budget for 2025 to €162 billion in the Budget framework for 2029.
This investment surge will be possible thanks to a special €500 billion infrastructure fund and an exemption from debt rules for defence spending approved in March 2025.
“With this Budget and the €500 billion investment fund, we are setting in motion what we need now to ensure new economic strength, make our country modern and future-proof and to enable safe living in Germany in the future as well,” Mr Klingbeil said.
From 2025 to 2029, Germany will borrow a total of €500 billion for its Budgets, with additional €270 billion borrowed through its infrastructure fund, according to the draft Budget and mid-term financial plan.
Adding the funds to be borrowed with the defence fund created by the previous government when Russia invaded Ukraine in 2022, total borrowing in the five-year period would rise to €847 billion.
After former chancellor Olaf Scholz’s coalition collapsed in November 2024, the last government ran out of time to pass the 2025 Budget. Germany has been operating on a provisional budget since the start of the year.
The Budget committee will finalise details of the 2025 Budget in September 2025, when it should also be approved by lawmakers.
The first draft of the 2026 Budget should be approved on July 30, 2025. It is to be discussed in Parliament in September 2025, then approved in the Lower House of Parliament in November 2025 and the Upper House in December 2025, following the usual schedule. REUTERS
