Germany’s 2026 budget landed in parliament on Tuesday with a double message: a historic borrowing spree funding €126.7 billion in new investments for infrastructure, transport, schools, and other major projects, and a warning of a €30 billion shortfall in 2027.
Even as Finance Minister Lars Klingbeil hailed the spending surge as a remedy for Germany’s economic troubles, he warned of austerity ahead, pointing to a €30 billion shortfall in the 2027 budget. The Social Democrat echoed conservative Chancellor Friedrich Merz in calling for welfare cuts and a package of reforms “that create new growth, that create more jobs, that ensure that social spending falls and government revenues grow.”
Opposition lawmakers argue the centrist coalition is squandering investment funds on giveaways such as restaurant tax breaks, rather than on critical projects that could revive growth. The looming deficit, despite the borrowing windfall, stems partly from concessions to the Greens: debt-financed funds can only be used for new spending, not to patch existing holes.
Parliament’s work on the 2026 budget begins just days after lawmakers, with considerable delay, approved the 2025 budget.