Federal Budget 2027: Coalition Plans Higher Debt and Defense Spending – Criticism of Cuts to Climate Fund

Defense Spending Rises by One Third

In the core budget, the government plans defense expenditures of around 109.7 billion euros for 2027 – an increase of roughly one third compared to the 2026 budget, in which Defense Minister Boris Pistorius still had 82.69 billion euros at his disposal. Including the Bundeswehr special fund, the defense budget reaches almost 140 billion euros according to the draft's calculations. As justification, the cabinet points to global crises, the situation in the Middle East, and the ongoing war in Ukraine. Around 11.6 billion euros are earmarked to support Ukraine in the war against Russia. The NATO target of 3.5 percent of gross domestic product for defense is to be reached by 2029.

SPD chairman Lars Klingbeil emphasized the necessity of higher defense spending on Sunday evening on ARD's "Sommerinterview": "Man kann sich gegenüber Putin nicht mit der schwarzen Null verteidigen", he said with a view to Russian President Vladimir Putin and threats from Russia. To relieve the debt service burden, the start of repayment of loans taken out by the Bundeswehr special fund is also to be postponed from 2031 to 2033.

Record Investments amid Growing Debt Burden

The federal government plans investments in 2027 at a record level of 117.5 billion euros. At the same time, Klingbeil must withdraw around 6.8 billion euros from a reserve, leaving only 3.9 billion euros there for the coming years. By 2030, expenditures in the financial planning rise to 635.4 billion euros, and the federal government's interest payments are set to grow from 41.9 billion euros in 2027 to around 80.7 billion euros in 2030. Total new borrowing in 2027 stands at just over 200 billion euros and rises to 219.5 billion euros by 2030.

The federal government is thereby also responding to a difficult economic situation: real economic growth of only 0.9 percent is expected for the coming year. The cabinet draft cites as reasons "die globalen Krisen und Konflikte sowie ihre Auswirkungen auf Energiepreise und Lieferketten", which make it "ganz erheblich" more difficult to overcome "die Wachstumsschwäche unseres Landes". The original financing gap of 34 billion euros for 2027 had been able to be closed, Klingbeil explained, and spoke of a "konsolidierten Haushalt". At the same time, he announced further savings: "Wir müssen konsolidieren, da führt kein Weg dran vorbei", the finance minister said on ARD.

In the coming year, every ministry is to contribute an additional two percent to the already adopted savings of one percent. The Federal Employment Agency faces an additional need of 5.2 billion euros due to the situation on the labor market. The government expects additional revenues, among other things, from the fight against tax crime, higher taxes on alcohol and tobacco, and a plastic tax. The income tax reform announced in the coalition agreement does not yet appear in the 2027 budget and, according to the current state, is only counter-financed for about half, which could entail additional debt.

The largest individual budgets go to the Ministry of Labor with 201.46 billion euros (mostly for pensions), followed by the Defense Ministry and the Ministry of Transport with 26.43 billion euros. The Federal Ministry of Research, Technology and Space receives 21.97 billion euros, the Federal Ministry for Economic Cooperation and Development 9.47 billion euros – almost six percent less than in the current year.

The financing gap in subsequent years remains substantial according to the cabinet draft: 22 billion euros are missing in 2028, 38 billion euros in 2029, and finally 47 billion euros in 2030. The so-called need for action adds up to 107 billion euros by 2030.

Environmental Groups Criticize Cuts to the Climate Fund

Sharp criticism of the budget plans comes from environmental organizations because the government plans to shift around 2.7 to 3 billion euros from the Climate and Transformation Fund (KTF) into the core budget. The KTF is funded primarily from revenues from EU emissions trading and is intended to provide funds for climate protection. The climate organization GermanZero spoke of an "offenen Kampfansage" to climate protection, and the environmental organization Greenpeace described the plan as a "Plünderung" of the fund.

Greenpeace financial expert Mauricio Vargas said: "Finanzminister Klingbeil will den Klima- und Transformationsfonds plündern, um die Einkommensteuer von Besserverdienenden zu senken, das ist eine schamlose Zweckentfremdung und ein Skandal für eine Partei, die für Fortschritt und Sozialstaatlichkeit stehen will". Vargas himself also spoke of a "Raubzug". Felix Banaszak, party chairman of Bündnis 90/Die Grünen, declared: "Wer dieses Geld zweckentfremdet, um Haushaltslöcher zu stopfen, verspielt Vertrauen und bremst die Modernisierung unseres Landes". Banaszak emphasized: "Die Einnahmen aus dem CO2-Preis sind kein Selbstbedienungsladen für den Finanzminister".

SPD parliamentary group leader Matthias Miersch defended the plans on ZDF's "Morgenmagazin" with the remark that in the Climate and Transformation Fund, "ehrlicherweise in den letzten Jahren relativ viel Kraut und Rüben" had been the case. Ingbert Liebing, chief executive of the municipal utilities association VKU, on the other hand, warned that the KTF was degenerating into a "Verschiebebahnhof für mangelnde Einsparbemühungen im Kernhaushalt". He said: "Der Klima- und Transformationsfonds wurde geschaffen, um zusätzliche Investitionen in Klimaschutz, Transformation und Infrastruktur zu finanzieren."

Business and Industry Warn of Rising Debt

Criticism of the increases in spending and debt also comes from the business community. Tanja Gönner, chief executive of the Federation of German Industries, said: "Die geplanten Ausgaben- und Schuldenzuwächse im Haushalt sind alarmierend" and "Trotz massiver Neuverschuldung und hoher Steuereinnahmen gelingt es der Bundesregierung nicht, eine solide Haushaltsplanung vorzulegen". Marie-Christine Ostermann, president of the Familienunternehmer, accused the government of "statt endlich zu sparen Rücklagen [zu] plündern, Steuern [zu] erhöhen und mit Haushaltstricks nur noch mehr Mittel [zu] verschieben".

The German Trade Union Confederation (DGB) also expressed sharp criticism. DGB deputy chairman Stefan Körzell declared: "Dass sozialstaatliche Leistungen – bei Gesundheit, Wohnen, Familie und in anderen Bereichen – für die Sanierung des Haushalts herhalten sollen, ist nicht hinnehmbar" and "Der Finanzminister kürzt hier an der Zukunft unseres Landes". The DGB vice chairman fundamentally welcomed the planned record investments of 117.5 billion euros: "Das ist richtig, um das Land klimagerecht zu modernisieren, Beschäftigung zu sichern und zu fördern". However, he demanded: "Statt etwa bei Wohn- oder Elterngeld zu kürzen, müssen wir unseren Sozialstaat klüger und effizienter machen, um allen Menschen gute, solidarisch finanzierte Leistungen zu bieten."

Opposition Criticizes Military Spending

The opposition criticizes in particular the sharp rise in defense spending. Dietmar Bartsch, budget politician of Die Linke, said: "Obwohl der Finanzminister Schulden macht wie keiner seiner Vorgänger in den letzten 77 Jahren, und die Zinslasten auf 80 Milliarden im Jahr anwachsen werden, reicht das Geld nur für eines: den kreditfinanzierten Kauf der Militärtechnik von vorgestern." Bartsch also warned: "Bis 2030 könnte knapp jeder fünfte Euro aus den Ste