{"id":211602,"date":"2025-06-24T23:15:16","date_gmt":"2025-06-24T23:15:16","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/211602\/"},"modified":"2025-06-24T23:15:16","modified_gmt":"2025-06-24T23:15:16","slug":"how-germany-will-spend-its-record-e850-billion-in-debt","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/211602\/","title":{"rendered":"How Germany will spend its record \u20ac850 billion in debt"},"content":{"rendered":"

\nBERLIN \u2013 Germany’s departure from post-financial crisis austerity kicked off with a big bang on Tuesday, as the country’s new finance minister unveiled his first budget.<\/b>\n<\/p>\n

\nLars Klingbeil has only been in office for 49 days \u2013 which is also the total of his experience on the subject of fiscal policy.\n<\/p>\n

\nBut with the presentation of his first draft budget, the Social Democrat has already managed to make history: he will become the finance minister who oversees the largest accrual of debt in any post-war budget, if it is passed as drafted.\u00a0\n<\/p>\n

\nThe proposal would see Germany take some \u20ac850 billion in new debt over the current term, which runs until 2029. That would boost the current national debt of roughly \u20ac1.6 trillion, accumulated over decades, by more than half, to \u20ac2.5 trillion.\n<\/p>\n

\nAll of it is underpinned by the government parties\u2019 seminal decision to bid adieu to Germany’s strict constitutional deficit limit, the debt brake<\/a>, that had been in place since the financial crisis.\n<\/p>\n

\n\u201cUnlike my predecessor, I don’t see any particular value in keeping the money and not spending it,\u201d Klingbeil told journalists on Tuesday \u2013 a veiled jab at his predecessor-but-one, Christian Lindner. The Liberal had imposed a regime of austerity that ultimately broke the previous coalition government.\n<\/p>\n

\nBut where Klingbeil saw \u201crecord investment\u201d, critics saw waste. The Greens, who had helped pass the government\u2019s debt package despite being in opposition, said conservative Chancellor Friedrich Merz had “broken his promise\u201d.\n<\/p>\n

\nTheir co-chair, Franziska Brantner, presumed that Klingbeil was misappropriating the new debt-funded fiscal headroom to fund bloated pet spending, including on subsidies for natural gas.\n<\/p>\n

Spending breakdown<\/strong>
\nHere is what is known about what Germany will actually spend its record budget on:\u00a0
\nSecurity: The model student
\nLifting the constitutional limits on defence spending will allow Germany to reach NATO\u2019s new target of spending 3.5% of GDP on core defence six years ahead of time, by 2029.\u00a0<\/p>\n

\nThe plan is to increase annual spending to around \u20ac150 billion by the end of the term \u2013 triple the current defence budget of \u20ac52 billion. Some of it will go towards hiring 10,000 additional soldiers by the end of this year.\u00a0\n<\/p>\n

\nThis year alone, \u20ac8.3 billion will be spent on military aid to Ukraine, the highest annual amount since the start of Russia\u2019s full-scale invasion in 2022.\u00a0\n<\/p>\n

\nNotably, Klingbeil also wants to pay for an additional 1,000 officers for the German border force, which would back Interior Minister Alexander Dobrindt\u2019s controversial new border regime<\/a>.\u00a0\n<\/p>\n

Growth: Handouts all around
\nInvestment into areas like mobility, digitalisation, innovation, education, research, and climate protection will jump by 55% this year (to \u20ac115 billion). Over the next 12 years, \u20ac500 billion will be made available via the infrastructure fund, \u20ac100 billion of which will go into the green transformation.<\/p>\n

\n\u20ac100 billion will be invested into Germany’s ailing railway infrastructure, a stain on the national penchant for punctuality and functionality. National railway operator Deutsche Bahn has said it would need about \u20ac150 billion by 2034 to keep going.\n<\/p>\n

\nThe government has put significant political capital into their \u2018growth booster\u2019, a package of cuts to corporation tax and subsidies for private investment. But it won\u2019t come cheap: a deal will have to be struck with regional state and municipalities to cover their expected loss in revenue.\n<\/p>\n

\nAdditionally, the government will subsidise energy for consumers and companies.\n<\/p>\n

Social spending: Kicking the can
\nSocial spending makes up more than a third of the total budget (37%), and over a quarter (27%) of the pension bill \u2013 <\/strong>an unreformed headache for successive German governments.<\/p>\n

\nKlingbeil made clear on Tuesday that he believed the system would have to be made more efficient, but not through benefit cuts.\u00a0\n<\/p>\n

\nInstead, he is planning on investing an additional \u20ac6.5 billion on childcare and \u20ac4 billion a year on social housing.\n<\/p>\n

Pork barrel politics: Trouble for future Klingbeil
\nMuch was made about provisions in the coalition agreement which committed to forking out subsidies for the pensions of stay-home mothers, commuters, and diesel for use in agriculture.\u00a0<\/p>\n

\nThey are the brainchildren of Klingbeil\u2019s coalition partners, the conservative Bavarian Christian Democrats.\n<\/p>\n

\nBut they won’t feature in his first budget, Klingbeil said. Still, the coalition deal locks him into including them in future budgets \u2013 \u201cif fundable.\u201d If not, expect trouble ahead.\n<\/p>\n

Interest rates: Growing burden
\nAs Germany borrows more, its annual interest repayments will rise: they’re set to double from \u20ac30 billion to \u20ac61.9 billion by 2029, said Klingbeil\u2019s junior Minister Steffen Meyer.\u00a0<\/p>\n

\nHe failed to deliver a concrete number for the expected debt burden by the end of the term. Germany\u2019s debt-to-GDP ratio currently stands at 63%.\n<\/p>\n

Savings: Loading
\nGiven the multi-billion euro debt bonanza, it is hardly surprising that cuts and efficiency savings were not a priority for Klingbeil and Meyer. The latter somewhat vaguely called it a \u201cconsistent task\u201d for the government, instead of giving a number.\u00a0<\/p>\n

\nKlingbeil noted that he’d declined at least \u20ac47 billion in requested spending from his fellow ministers.\n<\/p>\n

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